Roth MKM initiated Camping World (CWH) with a Buy rating and a $30 per share price target in a note to clients on Wednesday.
Analysts cited an opportunity for accelerated M&A growth, as well as CWH being uniquely positioned to take advantage of the increased supply of used RVs and M&A synergies.
The firm's Buy rating is based on four factors: "1) an expected bottoming of new RV demand trends, 2) overall sales and profit benefit from a well-developed used RV business, 3) stable high-margin service offering, and 4) advantageous M&A environment supporting accretive acquisition growth as smaller, under- capitalized players look for an exit strategy."
"The pace of acquisitions has picked up meaningfully in recent months as Camping World looks to capitalize on emerging opportunities as dealership owners look for an exit strategy," said the analysts. "CWH traditionally pays 2x-4x trailing TTM EBITDA although the recent round of deals are coming in well below that range."
They added that the company has announced ~30 transactions so far in 2023, to the current ~220 count, with a goal of hitting 320 total locations by the end of 2028.
"Using an estimated 20 net additions, we conservatively forecast $400mn-$500mn of annualized sales contribution, with room for significant upside as CWH plugs each location into the growth algorithm (i.e., used, F&Icand P&S sales) when fully integrated," the analysts explained.
Furthermore, the investment firm expects CWH's best-in-class used business model to drive margin expansion as the mix of used to new units expands and as the model is applied to acquired companies.