- Shares trade at just 5.3X forward earnings, pays nearly a 9% yield
- Brace for earnings miss and be ready to scoop up shares at attractive levels
- Rising interest rates, recession risk, and falling consumer discretionary spending
Camping products and recreational vehicle (RV) dealer Camping World (NYSE:CWH) has been a direct benefactor of the pandemic as consumers discovered or rediscovered outdoor leisure activities. The lifting of COVID restrictions and spread of vaccinations haven’t stopped the growth at Camping World. Investors ponder if there is a new normal emerging for the industry. From a valuation standpoint, shares are trading very cheap at just 5.3X forward earnings with a lofty 8.75% annual dividend, assuming forward estimates aren’t revised down. It actually trades at a cheaper valuation than RV makers Winnebago Industries (NYSE:WGO) trading a low 4.1X forward earnings with a stingy 1.9% annual dividend yield or Thor Industries (NYSE:THO) trading at 9.2X forward earnings and a 2.3% annual dividend yield.
Bracing for a Recession
The U.S. Federal Reserve has raised interest rates 3% in the past six months in an attempt to curb rampant inflation. However, the results have been slow to materialize as the September headline CPI was 8.2% missing 8.1% analyst estimates but still showing progress from the June highs of 9.1%. The (-36%) decline in August RV deliveries for the industry may foreshadow a decline in Camping World’s RV sales. Normalization and the potential for a slowdown in sales to be reported in its next earnings report should give investors pause about rushing into the stock. The RV business has been going gangbusters since the pandemic lockdowns and it appears to be very sticky as underlying consumer lifestyle changes continues to drive demand. However, rising interest rates and waning consumer discretionary spending have likely taken a toll on demand and investors should brace for potential shortfall. Supply chain restraints have been easing as evidenced by the more than doubling of vehicle inventories since same period last year.
Minimal and Mobile Lifestyle Trend Driver
The pandemic amplified the trend of minimalistic and mobile living and experiential travel and outdoor recreation. There are numerous new content providers on YouTube expounding the joys of van life and RV-ing as a lifestyle adjustment transcending beyond just for vacation, but applicable as a mobile residence and office. There’s the possibility that a recession could drive more consumers towards minimalist and mobile living especially as fuel costs are continuing to fall.
Is Normalization Coming in Q3 2022?
On Aug. 2, 2022, Camping World released its fiscal second-quarter 2022 results for the quarter ending June 2022. The Company reported a profit of $2.16 per share beating analyst estimates for $1.79 per share by $0.37 per share. Revenues rose 5.2% year-over-year (YoY) to $2.17 billion beating $2.03 billion consensus analyst estimates. New and used vehicle inventories rose to $1.7 billion from $782.5 billion a year ago due to the easing of supply chain restraints. The Company continues to pay its $0.625 per share quarterly dividend or $2.50 per share annualized dividend.
The Prophet Speaks
Camping World celebrity CEO Marcus Lemonis commented:
“We are pleased with the sale of almost 39,000 new and used RVs which contributed to record revenues for the second quarter. We believe our team has both the focus and experience to navigate our business through changes in market conditions as evidenced by our solid financial results.”
Here’s What the Charts Say
Using the rifle charts on the weekly and daily time frames provides a broader view of the landscape for CWH stock. The weekly rifle chart formed breakdown when shares fell under the $27.17 Fibonacci (fib) level to bottom out near the $23.03 fib before staging a rally. The weekly 5-period moving average (MA) resistance is still falling at $25.96 followed by the rising 15-period MA at $27.68. The weekly 200-period MA support is slowly rising at $25.23. The weekly 50-period MA resistance is falling at $30.81. The weekly market structure low (MSL) buy trigger is still holding up at $24.35. The weekly stochastic is falling through the 40-band and weekly lower Bollinger Bands (BBs) sit at $18.74. The daily rifle chart has been in an uptrend but losing steam as the daily 5-period MA support gets tested at $27.39 followed by a rising 15-period MA at $26.14. The daily stochastic ripped up through the 80-band. The daily 50-period MA at $28.83 nearly overlaps with the daily 200-period MA resistance at $28.99. The daily upper BBs sit at $30.27 and daily lower BBs sit at $22.14. With the potential for a weak earnings report, it’s best to consider waiting out the earnings reaction for sell-off to attractive pullback levels at the $25.39, $23.98 fib, $23.03 fib, $20.83 fib, $19.55 fib, and the $17.70 fib level.