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Jonathan Poland
Jonathan Poland
Articles (370)  | Author's Website |

Dollar-Cost Average on Camping World

The company's stock is down again after announcing quarterly results

August 10, 2018 | About:

This week Camping World (NYSE:CWH) reported numbers, missing the estimates for earnings per share by a dime and revenue by $30 million, which sent the stock down below $20 for the first time since June. But, here’s what’s actually important: Earnings per share was 96 cents for the quarter, and revenue was up 13.3% year-over-year.

Camping World recently announced the planned expansion of its sales locations by more than 30% and on the call, CEO Marcus Lemonis talked about how well the company’s RV business was doing:

“Our company had a very solid second quarter in our RV business and the industry growth prospects are equally good … In the second quarter we did over $1 billion in new and used RVs a record 33,637 RVs sold a nice 8.5% increase. What’s even more important is the all time high 21,745 new towable units sold. Not only was that an increase of 14.1% in total, but notably our travel trailer same-store sales units were up a strong 6.7%.”

Lemonis controls 52% of the company through two classes of super-voting stock, leaving public investors with a 62% economic interest in the company but only 12% of the votes. In other words, the company lives and dies by Lemonis. Unfortunately, short-sellers have targeted the company, accumulating north of 40% of the float, amounting to over 12 million shares.

He went on to say:

“Later this year we will be starting the move to a single web platform that will allow us to consolidate all of our inventory and distribution capabilities across all of our brands and channels. This will allow us to streamline our process, dramatically improve scalability and allowed us to ship anywhere in the U.S. in one day, thereby opening the door to becoming a direct and preferred seller on Amazon in addition to our own ecommerce business.”

Finally, something Lemonis said that seemed to have gone overlooked by analysts:

“Our revenue remained strong as we come off the record quarter. We are raising our revenue guidance to $4.9 billion to $5.50 billion based on the continued strength of our RV business and the RV market.”

In June, it announced plans to considerably increase RV sales locations over the next 15 months through the launch of Gander RV sales outlets, new store openings and further acquisitions. Management estimates RV sales locations will grow more than 30% by 2020. If successful, revenue will come in north of $6 billion and even if net profit margins don’t come back up, that still equates to over $120 million net, or $3.50 a share.

The stock is trading under $20. The demand for RVs remains strong, and Camping World is the leader. It's vertically integrated and is ready to meet rising demand. It’s also investing in the development of new and innovative products, which target young and cost-conscious consumers.

Say you bought 100 shares at $25 when I published my first article on Camping World in May; that same investment will bring in another 125 shares and get your hurdle down to $22.22. Lemonis should continue to gain more market confidence and when the dust settles and short-sellers cover their positions, the stock could easily be a triple.

Disclosure: I am long Camping World.

About the author:

Jonathan Poland
Thanks for reading! I'm a former money manager, publisher and analyst who helped investors produce market-beating results for over 15 years.

Visit Jonathan Poland's Website


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