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Bull of the Day: Camping World (CWH)

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Camping World (CWH - Free Report) is a Zacks Rank #1 (Strong Buy) that provides services, protection plans, products and resources for recreational vehicle enthusiasts. The company consists of the popular brand Good Sam as well as Camping World.

About the Company

Camping World is headquartered in Lincolnshire, IL and employs over 10,000. The company was founded in 1966 and has over 225 locations in 36 states.

CWH is valued at $2.3 billion and has a Forward PE of 9. The company holds a Zacks Style Score of “A” in Growth, but “F” in momentum.

Q3 Earnings

Earlier this month, the company reported EPS and saw a big beat on both the top and bottom lines. Q3 came on at $1.60 v the $1.03 expected, a 53% beat above Zacks estimates. Revenues came in at $1.6B v the $1.52B expected and the company raised its FY20 EBITDA forecast. Additionally, the company authorized a buyback of $100M, or about 4% of the market cap  

The beat on earnings is the third straight after almost two years of disappointing investors.

CEO Marcus Lemonis, a popular figure on CNBC, had the following comments on the quarter:

"Coming off of an extremely positive second quarter, demand remained strong and we were able to achieve record breaking third quarter results.” 

Estimates and Upgrades

Looking at estimates for the current quarter, we see a slight drop. However, for the current year estimates have ticked 15% higher over the last month, from $2.61 to $2.99.

After earnings, the company saw a handful of analysts reiterating their bullish stance. JPMorgan reiterated its Overweight and price target of $45, while Monness Capital reiterated its $49 target.

Stock Drops   

Camping World saw a lot of success during the pandemic as international travel was much harder. Consumers flocked to recreational vehicles and hit the road, exploring regional destinations. The stock went from a low of $3.40 in March to $42.49 in August on this phenomenon.

With a vaccine on the horizon and travel likely opening up next summer, the wind has been taken out of the sails. So, a pullback is definitely warranted and the stock fell almost 50%. However, if another stimulus package comes soon, the company could see another ramp in sales.

The Technical Take

The charts say this recent sell off is likely overdone and investors should expect a relief rally at the very least.

The earnings numbers were good, so the stock rallied up to the 50-day moving average at $30.50, but found sellers. From there, the news of a vaccine brought selling into the companies that benefited from COVID, which was CWH. It fell 25%, all the way to the 200-day MA, where it bounced.

Bulls will look to test the 50-day MA again around the $30 level. If further selling persists, watch the 61.8% Fibonacci retracement level under the $19 level.

In Summary

Camping World has been an extremely volatile stock in 2020. The move from the pandemic lows to August highs was overdone and now the stock is pulling into buyable levels.

Investors should be aware of the risk that numbers won’t be as good over the winter and into a COVID free 2021. However, there is no reason to believe that pent up demand and more stimulus could provide additional tailwinds next spring and summer.

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