The shares of Vail Resorts (NYSE: MTN) have surged past pre-Covid levels despite low room occupancy rates observed by the hotel industry. The company provides mountaineering-related services including ski school, mountain biking, hiking, and lodging in the U.S. and Canada. Per investor presentation, the company is focusing on ski pass sales to expand its total addressable market and push its top line. An advance ski pass is a cheaper alternative that provides flexibility of resort selection with additional services. The company expects its FY2022 (year ending in July) net income to fare between $278 – $349 million, fairly comparable to $301 million in 2019. Thus, Trefis believes that the stock price is stretched with little room for growth. Our interactive dashboard analysis highlights Vail Resorts During 2008 Recession vs. Now.
Timeline of 2020 Crisis So Far:
- 12/12/2019: Coronavirus cases first reported in China
- 1/31/2020: WHO declares a global health emergency.
- 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
- 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, 2020, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
- From 3/24/2020: S&P 500 recovers 95% from the lows seen on Mar 23, 2020, with the Fed’s multi-billion dollar stimulus package keeping the economy afloat during the prolonged lockdown and the vaccination drive allowing things to gradually return to near-normal conditions despite several waves of Covid infections.
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In contrast, here’s how MTN and the broader market performed during the 2007/2008 crisis.
Timeline of 2007-08 Crisis
- 10/1/2007: Approximate pre-crisis peak in S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
- 3/1/2009: Approximate bottoming out of S&P 500 index
- 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)
Vail Resorts Stock vs S&P 500 Performance Over 2007-08 Financial Crisis
MTN stock declined from levels of around $64 in October 2007 (pre-crisis peak) to levels of around $18 in March 2009 (as the markets bottomed out), implying MTN stock lost 71% from its approximate pre-crisis peak. It recovered post the 2008 crisis to levels of about $37 in early 2010 – rising by 100% between March 2009 and January 2010. In comparison, the S&P 500 Index first fell 51% in the wake of the recession before recovering 48% by January 2010.
Vail Resorts’ did not suspend dividends in 2020
Before the pandemic, Vail Resorts’ revenues grew by 13% per year from $1.6 billion in 2016 to $2.3 billion in 2019, assisted by a series of acquisitions that led to a surge in skier visits (The number of people visiting Vail’s mountain resorts utilizing a ticket is recorded as skier visits). The company’s operating margin remained fairly stable at 17% and net margins trended downward due to rising interest expenses. In FY2020, the company reported a 14% (y-o-y) contraction in revenues and a sizable dip in earnings. However, the cash from operations assisted shareholder returns. The cash dividends declared per share declined by 20% from $6.46 in 2019 to $5.28 in 2020, as opposed to suspension of dividend payouts by competitors. (related: Missed The Rally In Hyatt Stock? Wait There Could Be More).
Phases of Covid-19 crisis:
- Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
- Late-March 2020 onward: Social distancing measures + lockdowns
- April 2020: Fed stimulus suppresses near-term survival anxiety
- May-September 2020: Recovery of demand, with the phased lifting of lockdowns – no panic anymore with number of cases appearing to have plateaued
- October 2020-February 2021: Unprecedented surge in Covid cases forcing a fresh round of lockdowns across the nation
- Since March 2021: Ongoing vaccination drive and gradual re-openings drive an improvement in demand – buoying market sentiment
Considering the monumental rise in Vail Resorts stock since February 2020 levels, we believe that the stock price is stretched. But should you, Buy The Dip In Las Vegas Sands Stock?