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Vail Resorts (MTN) Banks on Season Pass Program, Traffic Low

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Vail Resorts, Inc. (MTN - Free Report) is likely to benefit from solid season pass program, marketing initiatives and investments in expansion projects. However, decline in traffic due to the pandemic- related woes is a concern.

Let us delve into the factors that suggest that investors should hold on to the stock for the time being.

Growth Catalysts

Vail Resorts has been witnessing higher season pass sales lately. During the fiscal second quarter, the company witnessed 71% visitation from its season pass-holders compared with 59% in the prior-year quarter. Markedly, the company has been benefiting from its offerings such as Epic Pass, Epic Local Pass, Epic Day Pass and Epic Coverage products.

Additionally, the company is increasingly focusing on digital marketing and media advertising to drive traffic and sales. Vail resorts completed one of its final stage of modernization project and invested in technology to program its data-driven marketing efforts. Notably, its ability to leverage guest data, targeted digital marketing efforts, broad product offering along with associated discounts are likely to yield, going forward.

Meanwhile, the company continues to reinvest in its resorts to boost customer traffic. During the fiscal second quarter, the company highlighted some of its investments that were previously deferred owing to COVID-19. This includes plans to work on the 250-acre lift-serviced terrain expansion in the McCoy Park area of Beaver Creek. As part of its $35-million capital plan (for Triple Peaks), the company plans to upgrade its lift services at Keystone, Crested Butte and Okemo. Nonetheless, these investments are likely to drive customer access and circulation, in the upcoming periods.

Also, Vail Resorts increased investments in maintenance capital to support infrastructure across resorts. During the fiscal second quarter, the company highlighted investments in one-time items associated with integrations worth $5 million and reimbursable investments in real estate worth $12 million.

Concerns

So far this year, shares of the company have gained 17.2% compared with the industry’s 25.1% growth. The downside in price performance can be primarily attributed to the coronavirus pandemic.

During the fiscal second quarter, the company witnessed dismal visitation owing to pandemic-led restrictions in Whistler Blackcomb, Tahoe and Vermont. During the quarter, total visitation across North American destination mountain resorts and regional ski areas were down 5% year over year. Although, the company is witnessing sequential improvements in visitation, it is still behind the pre pandemic levels. Owing to the uncertainty revolving around the crisis, future outbreaks and prolonged shutdowns cannot be ruled out. Meanwhile, the company refrained from providing guidance for fiscal 2021.

Zacks Rank & Key Picks

Vail Resorts currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space include RCI Hospitality Holdings, Inc. (RICK - Free Report) , SeaWorld Entertainment, Inc. (SEAS - Free Report) and WW International, Inc. (WW - Free Report) . RCI Hospitality sports a Zacks Rank #1, while SeaWorld Entertainment and WW International carry a Zacks Rank #2 (Buy).

RCI Hospitality has a three-five year earnings per share growth rate of 12%.

SeaWorld Entertainment 2021 earnings are expected to surge 118.3%.

WW International has a trailing four-quarter earnings surprise of 10.3%, on average.

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