Vail Resorts Downgraded, JMP Cites Valuation Concerns

• Vail Resorts, Inc. MTN shares have surged 38 percent year-to-date, even after hitting a low of $85 on March 11.
• JMP Securities’ Robert A. LaFleur downgraded the rating on the company from Market Outperform to Market Perform.
• Shares had already surpassed the former price target of $114, and the downgrade is a valuation call, LaFleur said.

Vail Resorts’ shares have gained more than 40 percent over the past 12 months and about 38 percent year-to-date, versus a slight gain in the S&P during the same periods.

“We remain positive on the company’s strategy and continue to be impressed with how management has de-risked the heretofore volatile and weather-dependent ski business and flawlessly executed a brilliant expansion strategy,” Robert LaFleur wrote.

The growth and success of the season pass program and strategic purchases of resorts in Utah and Australia indicate that the company is worth the EBITDA multiple that investors are willing to pay for a ski company.

LaFleur added, however, that “after modeling the synergies and benefits of Utah and Perisher, the earnings path we see from here does not, in our view, support the aggressive increase in target multiple we would need to raise our price target enough to maintain a Market Outperform rating.”

While there may be limited upside to Vail Resorts’ shares, there is also limited downside, given the current fundamentals and the generally positive prospects for the 2015-2016 ski season, the JMP Securities report noted.