JPMorgan Downgrades Camping World Holdings (CWH) to Neutral

JPMorgan analyst Ryan Brinkman downgraded Camping World Holdings (NYSE: CWH) from Overweight to Neutral with a price target of $24.00 (from $285.00).

The analyst comments "Expanded Thoughts on Camping World: Downgrade shares of Camping World (CWH) to Neutral from Overweight, on another round of estimate cuts impacting 2H24, lack of visibility as to the timing and degree of recovery in depressed new and used RV prices presently pressuring near-term estimates, high financial leverage, and relative share price resilience in the context of materially negative estimate revisions. We upgraded Camping World shares to Overweight from Neutral on September 6, 2020 when they traded at $30.47 (they are since -24.1% vs. the S&P 500 +71.1%) as the recreational vehicle industry was beginning to boom in the wake of COVID-19 as consumers then looked to travel in such a way as to avoid contraction of the virus, although we had no idea just how strongly the RV industry would truly boom (CWH went on to generate $942 mn of EBITDA in 2021 vs. JPMe $425 mn and Bloomberg consensus of $431 at the time of our upgrade in September 2020), nor of how far it would then subsequently fall (as exemplified by the current Bloomberg consensus for 2024 EBITDA being $179 mn, which is down from $454 mn on this date a year ago and $676 mn two years ago). We stuck with our Overweight rating on the shares as the company increasingly over-earned by far more our earlier estimates, such that it became clear estimate revisions would eventually turn sharply negative. And we stuck with our Overweight rating after earnings corrected lower than we earlier imagined, on remaining confidence in stronger normalized through-the-cycle earnings than valuation seemed to imply, and so it seems a reasonable question why we are downgrading the shares now after estimate revisions have surely largely run their course. One reason is that we estimate there is likely at least one more round of needed negative revision, given the degree of persistent softness in new and used RV pricing. Another is it that while it is clear in retrospect that investors have all along largely looked through extreme swings in expected NTM results (with multiples of bumper 2021 profits for example compressing to just 4.8x EBITDA and 7.0x EPS when the stock peaked at $48.43 in May 2021), still we are impressed that CWH shares are nevertheless +32.1% over the past year (vs. the S&P +39.1%) despite the consensus for 2024 CWH EBITDA declining by -61% over the same time (i.e., from $454 mn a year ago to $179 mn today) and given the shares have lost just -6.8% over the past two years (vs. the S&P +59.5%) despite the consensus for 2024 CWH EBITDA declining by -74% over the same time (i.e., from $676 mn two years ago to $179 mn today). High financial leverage is another concern. We are establishing a $24 December 2025 price target, which is predicated upon a 50/50 blend of EV/EBITDA-based analysis (which applies a 9.0x target multiple to our newly rolled out 2026 EBITDA estimate of $410 mn) and P/E (which applies a 12.5x target multiple to our newly rolled out 2026 EPS estimate of $1.75) in comparison to our previous $25 December 2024 price target which had considered 2025 earnings and 2024-end capital structure."

For an analyst ratings summary and ratings history on Camping World Holdings click here. For more ratings news on Camping World Holdings click here.

Shares of Camping World Holdings closed at $23.12 yesterday.

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