Vail Daily. Thursday, May 31, 2012) expects the stock to outperform the S&P 500 by more than 10 percent over the next 12 months. "With Vail shares declining 12 percent in the last two months (compared to the S&P decline of 5 percent), we believe this has created an attractive entry point as we push toward the 2012-13 ski season", Wieczynski wrote in a note to investors. "While Vail shares have historically traded lower (7 percent average decline during summer months back to 2007) during the summer months, we believe continued encouraging demand signals toward the 2012/2013 ski season, continued strong international visitation, revised summer program offerings, and solid Free Cash Flow (FCF) support could all be catalysts for the shares".
Five reasons Stifel Nicolaus thinks Vail shares are compelling:
• Encouraging season pass sales. Stifel Nicolaus says Vail can "easily push mid-to-upper single digit price increases on their pass program over the next five years given the quality of assets and the value proposition still inherent for their customers".
• Continued strong international visitation should help drive margins. Citing "impressive" international visitation in the 2011-12 ski season, despite snowfall, the firm believes "spending on non-mountain activities will continue to improve given international guests' propensity to spend more than the typical domestic visitor".
• Revamped summer program could partially eliminate seasonality. The firm points to the recently passed legislation — the Ski Areas Recreational Opportunity Enhancement Act that allows for more on-mountain summer activities, which Congress passed last year — "could present a low risk opportunity to drive incremental EBITDA".
• Strong FCF generation should allow for acquisitions or shareholder distributions. Stifel Nicolaus cites Vail's "underleveraged and conservatively managed balance sheet" as reasons to expect management to "carefully address any attractive M&A opportunities, whether they exist in the U.S., Europe or Asia".
• Valuation compelling at current levels. Current trading prices present an opportunity "for investors to enter the shares in order to capture upside to numbers heading into the 2012-13 ski season".
Other Vail Resorts analysts have also maintained that Vail Resorts shares (MTN on the New York Stock Exchange) are attractive because of the company's "asset quality, long-term pricing power, solid balance sheet, free cash flow, and strong management team", according to the latest investor note from Credit Suisse in May. Credit Suisse analyst Joel Simkins put the stock's price target at $55 in that note, while JMP Securities analyst Will Marks put the price target at $57 in his latest note to investors earlier this month (the stock closed on May 31 at $43.47).
While Bank of America Merrill Lynch analyst Shaun Kelley maintained a neutral rating for MTN as it enters a seasonally slow period, he wrote in a May 1 note to investors that Bank of America Merrill Lynch recognizes "the growth potential of its assets in a more normalized operating environment".
Vail Resorts is the leading mountain resort operator in the United States. Vail Resorts operate the mountain resorts of Vail, Beaver Creek, Breckenridge and Keystone in Colorado, and Heavenly, Northstar and Kirkwood in the Lake Tahoe area of California and Nevada, and the GrandTeton Lodge Company in Jackson Hole, Wyoming. The Company's subsidiary, RockResorts, a luxury resorthotel company, manages casually elegant properties. Vail Resorts Development Company is the real estateplanning, development and construction subsidiary of Vail Resorts, Inc. Vail Resorts is a publicly heldcompany traded on the New York Stock Exchange.