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Here's Why You Should Hold on to Vail Resorts (MTN) Stock

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Vail Resorts, Inc. (MTN - Free Report) is benefiting from increased demand for skiing, improved visitation and robust performance by both Mountain and Lodging segments. Also, increased focus on digital marketing and media advertising bodes well.

In the past three months, shares of Vail Resorts have gained 10.7%, almost in line with the Zacks Leisure and Recreation Services industry’s 10.6% growth. Apart from the above-mentioned tailwinds, the price performance was backed by a solid earnings surprise history. Vail Resorts’ earnings surpassed the Zacks Consensus Estimate in 11 of the trailing 14 quarters.
However, disruptions owing to the coronavirus pandemic along with competition and weather-related woes remain a concern for the company.

Factors Driving Growth

Vail Resorts has a season pass program under which the company offers a variety of season pass products for all the mountain resorts and urban ski areas in domestic and international markets. Increased demand for skiing has led the company to witness higher season pass sales lately. The company is benefiting from improving visitation. Excluding Peak Resorts, total visitation at the company’s U.S. destination mountain resorts and regional ski areas declined only 3% during the quarter, compared with the same period of 2019. Stronger destination visitation at Colorado and Utah resorts drove the company’s results.

The company continues to reinvest in its resorts to boost customer traffic. During the fiscal third quarter, the company highlighted some of its investments which 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. It also plans to install a new four-person high speed lift to serve the popular Peak 7 at Breckenridge. Furthermore, it planned to replace the Peru lift at Keystone and replace the Peachtree lift at Crested Butte with a new three-person fixed-grip lift. At Okemo, the company plans to compete a transportational investment, including upgrading the Quantum lift from a four-person to a six-person high-speed chair lift and relocating the existing four-person Quantum lift to replace the Green Ridge three-person fixed-grip chairlift.

Meanwhile, the company is focused on technological enhancements to support its data driven approach, guest experience and corporate infrastructure. Vail Resorts anticipates spending $115-$120 million during fiscal 2021 on resort capital expenditures, excluding one-time items associated with integrations worth $5 million and reimbursable investments in real estate worth $12 million. Nonetheless, total capital plan is expected in the range of $135-$140 million.

Strong growth in the season pass sales reflects Vail Resorts’ efficient guest-focused marketing efforts. The company orients its strategy with data analytics to drive targeted and personalized marketing toward guests. Guest data is captured through season pass programs; e-commerce platforms, including mobile lift ticket sales; the EpicMix application; and operational processes at the lift ticket windows. The company has been leveraging operating and marketing expertise to build out its destination resort presence within the largest ski market in the world. During the reported quarter, substantial growth in advance commitment has created a significant number of loyal customers for the company.

Vail Resorts has widespread geographical boundaries. Apart from operations in the United States, the company has expanded in North America, Japan and Europe. During the third quarter of 2021, the company witnessed border openings and weather remained better than that in the previous year. The weather conditions remained normal across Australia and North America. Also, there was no potential impact of COVID-related shutdowns or lockdowns in these areas.

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The coronavirus pandemic along with Canadian travel restrictions and border closures negatively impacted the company’s operations. During the third quarter, excluding Peak Resorts, total visitation at the company’s U.S. destination mountain resorts and regional ski areas declined 3%. Also, Whistler Blackcomb, which plunged 60% compared with third-quarter 2019, continues to hurt the company.

The ski resort and lodging industries are highly competitive. There are roughly 470 ski areas in the United States that serve local, and destination guests. Resultantly, Vail Resorts faces intense competition from other ski providers.

Furthermore, Vail Resorts’ business is highly dependent on weather conditions. Particularly, the ski business directly depends on the amount and timing of snowfall. Unfavorable weather conditions can adversely affect skiers’ visits and in turn hurt the company’s revenues and profits.

Zacks Rank & Key Picks

Vail Resorts carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are RCI Hospitality Holdings, Inc. (RICK - Free Report) , Camping World Holdings, Inc. (CWH - Free Report) and WW International, Inc. (WW - Free Report) . RCI Hospitality Holdings and Camping World Holdings sport a Zacks Rank #1 (Strong Buy). Meanwhile, WW International carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

RCI Hospitality Holdings’ earnings for fiscal 2021 are expected to surge 439.2%.

Camping World Holdings has a long-term expected earnings per share (three to five years) growth rate of 34.7%.

WW International surpassed earnings estimates in three of the trailing four quarters, the average surprise being 19.6%.

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