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Bear of the Day: Camping World Holdings (CWH)

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Camping World Holdings (CWH - Free Report) is a Zacks Rank #5 (Strong Sell) that is a provider of services, protection plans, products, and resources for recreational vehicle enthusiasts. It offers new and used RVs for sale, vehicle service, and maintenance through retail locations and membership clubs.

The stock has rallied nicely over the last couple of months, but investors might want to consider taking profits as earnings estimates drift lower.

About the Company

Camping World was founded in 1966 and is headquartered in Lincolnshire, Illinois. The company employs about 13,000 people and serves customers through dealerships, and online and e-commerce platforms.

The company operates in two segments, Good Sam Services and Plans; and RV and Outdoor Retail.  

CWH is valued at $2.2 billion and has a Forward PE of 20. The stock holds Zacks Style Scores of “A” in Momentum and Value. The stock pays a dividend of 2%.

Q3 Earnings

Camping World reported earnings in November, seeing $0.39 v the $0.15 expected. Revenue also came in slightly above expectations and same-store revenue was up 10.9% y/y.

Management was excited about being in “The final stages of clearing our inventory going into 2024”. While this caused margin compression, management is optimistic revenue and earnings to increase year over year.

However, analysts do not seem to be convinced yet as estimates continue to trend lower

Earnings Estimates

Over the last 90 days, earnings estimates have fallen from -$0.31 to -$0.49. For the next quarter, they have fallen from $0.24 to $0.02 over that same time frame.

For the current year, estimates have dropped from $0.77 to $0.69, or 10% over the last 90 days.

Next year does not look any better, despite management's optimistic view.  Over the last 60 days, earnings estimates have dropped from $1.61 to $1.29, a move lower of 20%.

While earnings looked good, the forward-looking view from analysts is not aligned with this view. Considering the 60% move higher in the stock since EPS, investors might want to take advantage of the rally.

Technical Take

The move higher in the stock over the last two months has been very impressive, with CWH moving off the 2023 lows at $16 to $28 in late December.

While there has been a small pullback, the stock is still above all its major moving averages and looks strong from the technical perspective.

Investors should be cautious if the 21-day MA at $25.50. A break below that spot should bring the price to the 200-day moving average at $24. A further pullback to the $22 halfway back level could be justified on a broad market sell-off.

In Summary

While Camping World is starting to fix some of the inventory issues, analysts are still doubting the company’s ability to improve earnings growth. Considering the big move higher in the stock, investors should be in profit-taking mode.

For those interested in the camping space, a better option might be Thor Industries (THO - Free Report) . The stock is a Zacks Rank #3 (Hold) that is trading close to 2023 highs.  

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