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Monday, BofA Securities issued an update on Vail Resorts (NYSE:MTN), reducing the price target from $200 to $185 while maintaining a Neutral rating on the stock. The downgrade comes as the stock trades near its 52-week low of $156.60, with shares currently at $158.47. BofA Securities analyst Shaun Kelley cited a decline in season-to-date visitation and weaker than expected performance over the President’s Day weekend as key factors for the adjustment. According to InvestingPro data, three analysts have recently revised their earnings estimates downward for the upcoming period, suggesting broader concerns about near-term performance.
The latest data indicates that Vail Resorts has experienced a 3% year-over-over decrease in visitation up to February 18, a slowdown from the previously reported 1% decline. The report detailed regional variations, with the Northeast seeing a 4% increase and Tahoe up by 1%, while Colorado and Park City (NYSE:TRAK) visitations dropped by 9% and 15%, respectively. The President’s Day weekend saw an overall 18% decrease in visitation, with the Northeast and Midwest regions down by 32%, and Park City and Colorado experiencing high single-digit decreases, despite a positive 4% uptick in Tahoe. These challenges have contributed to the stock’s significant YTD decline of 15.46%. Want deeper insights? InvestingPro offers exclusive access to 10+ additional key insights about Vail Resorts, including detailed financial health scores and Fair Value analysis.
Kelley expressed concern over these trends, noting that they are particularly troubling given the strong snowfall leading into the holiday, an acceleration in February bookings, and Vail Resorts’ own forecasts which anticipated an uptick in visitation later in the season. The report also provided a comparative valuation analysis, illustrating the de-rating of Vail Resorts’ shares compared to its peers.
In terms of snowfall, the report included specific figures for various resorts. Whistler recorded 228 inches, marking a 15% increase year-over-year. Vail Resorts’ five Colorado resorts averaged 204 inches, up by 8%. In contrast, Park City received 201 inches of snow, a significant 30% decrease from the previous year. The three Tahoe resorts managed by Vail Resorts averaged 174 inches, down by 7%, while the company’s five Northeast resorts averaged 123 inches, a substantial 47% increase year-over-year.
The revised price objective is now based on approximately 11 times the forecasted FY2025 EBITDA, a decrease from the prior multiple of 11.5 times. With current EBITDA at $817.46 million and trading at a P/E ratio of 25.47x, the stock appears to be trading at a premium relative to its near-term earnings growth potential. This change reflects a market re-rating and takes into account the recent performance and visitation trends reported by Vail Resorts. Despite these challenges, the company maintains a significant dividend yield of 5.6%, demonstrating its commitment to shareholder returns.
In other recent news, Vail Resorts reported a mixed start to the ski season, with a slight decline in skier visits by 0.3%, yet a 4.5% increase in lift ticket revenue, including season pass sales. The company also saw a modest 1.1% rise in ski school revenue and a 6.6% increase in dining revenue, though retail and rental revenue fell by 5.4%. Additionally, Vail Resorts expanded its credit facilities by $100 million and secured a $450 million incremental term loan, aimed at refinancing its convertible notes. The company repurchased approximately $50 million of its convertible notes at a 4% discount to par value, reflecting a strategic move to manage its debt. Meanwhile, Truist Securities adjusted its price target for Vail Resorts to $247, maintaining a Buy rating, following earnings that surpassed expectations. The earnings beat included a $27 million gain, largely attributed to a real estate sale, marking a significant shift after previous quarterly misses. However, Vail Resorts continues to face challenges, such as an ongoing ski patrol strike at Park City Mountain, which has not yet reached a resolution. The strike has added pressure on the company, with stakeholders closely monitoring the labor negotiations and potential impacts on operations.
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