Analyst Joining Camping World Holdings Party, Starts At Outperform

Camping World Holdings Inc CWH, a maker of recreational vehicles in the United States, is part of an industry that has been a beneficiary of an improving economy, low gas prices and low interest rates as well as improving home and stock prices, according to BMO Capital Markets.

Camping World debuted on Wall Street in October 2016, opening at $23.75, up from the offer price of $22. Since then, the stock has gained close to 29 percent.

BMO believes the company can grow earnings and EBITDA at a better rate than the current market expectations due to:

• Strong growth in the recreational vehicle industry
• Likelihood of share gains through scale and differentiated product offerings
• Roll up strategy of acquiring independent dealers

Faring Well In Good Times And In Bad

Analyst Gerrick Johnson noted that Camping World targets younger, first-time buyers by selling lower-priced, entry-level towable RVs. This is apart from the retiring baby boomers, who have supported the recreational vehicle industry, the analyst noted.

BMO clarified that the growth in the recreational vehicle industry benefits unit sales at its recreational vehicle dealership. Additionally, an increase in recreational vehicle usage benefits service offerings from Camping World and Good Sam, the firm added.

Rolling Up Benefits

With smaller mom-and-pop dealership making up roughly 90 percent of the market, BMO believes Camping World's strategy of rolling up would give it an opportunity to make accretive acquisitions. The firm thinks the company can lift sales and EBITDA margins for acquired dealerships by utilizing its scale, implementing best practices and overlapping its offerings of high margin services.

The firm is of the view that Gander Mountain, whose assets the company acquired following its bankruptcy, is a potential source of upside to its model beginning in 2018.

Deserves A Premium

BMO initiated coverage of Camping World at Outperform, with a $36 price target, which represents a premium over the stock's current multiple.

At time of writing, shares of Camping World Holdings were up 3 percent at $29.90.

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