Revving Up With Camping World, The Foremost Consolidator In A Fragmented Market

Camping World Holdings Inc (NYSE: CWH) is the largest RV retailer in America with a 12 percent market share of the new RV market. In a research report on Tuesday, Craig Kennison of Baird Equity Research initiated coverage of the stock with an Outperform rating and $27 price target.

According to Kennison, the company is on track to sell more than 75,000 new and used RVs this year across its 100 dealerships in 36 states. In addition, Camping World also operates the largest network of RV service facilities across the country and serves an installed base of more than 9 million owners.

By comparison, Camping World's largest competitor owns just 15 locations.

Camping World is a recent IPO, and shares began trading in early October and initially traded lower and took a few weeks to recover its losses.

Camping World, through its interest in Good Sam, sells emergency roadside assistance, extended service contracts, club memberships and insurance products. The analyst pointed out that these are all high-margin recurring revenue streams.

Foremost Consolidator

Kennison further stated that since 2011, Camping World has acquired 35 different retail locations and has additional plans to continue consolidating the industry. The analyst stated that the company is able to buy locations at a discount and then generates synergies from lower floorplan rates, lower real estate costs and generate incremental sales from its services and Good Sam brands.

Given Camping World's strong profile and ability to grow in a fragmented and consolidating market, the analyst believes the company's stock deserve to trade at a premium to the RV group and similar to the automotive industry where dealers trade at higher premium.

In fact, the analyst believes that ultimately, Camping World's stock should trade at a premium to the auto dealers given its superior margins and a richer mix of recurring profits.