Camping World Is About To Get This Market In Gear
Camping World (NASDAQ: CWH) is showing signs of firm support at the $26 level and we are not surprised. A combination of factors including institutional support has the market set up not only to bottom at this level but to reverse course and possibly start trending higher again. In regards to the institutions, they’ve been net buyers for the last 6 quarters and have increased their holdings by a dollar amount worth 7.6% of the market cap at today’s prices. Their holdings top 76% and are growing, as are holding among hedge fund managers and analysts followings.
The analysts, all 7 of them, rate the stock a firm Hold leaning toward Buy and that is down slightly over the past month, 3 months, and 1 year. The Insidertrades.com consensus price target, however, belies that trend and is more than 70% above the current price action. The consensus target is down in the 30 and 90 comparisons as well, but we think that trend will end now that Q1 results are in the bag.
Camping World Steadies On Mixed Results
Price action in Camping World steadied in the wake of the Q1 results despite mixed performance in relation to the analyst's estimates. The company reported a record $1.67 billion in revenue for growth of 6.7% over last year and beat the consensus by 180 basis points but the bottom-line results were weak. The takeaway is that bottom-line results were impacted by non-cash impairments and accelerated amortization that ultimately make the company stronger. As far as margin goes, the gross margin improved by 29 basis points over last year proving the company’s ability to manage the supply chain and inflation crisis. The bad news is the $1.15 in adjusted earnings is $0.17 short of the consensus but there is still another factor to be aware of.
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Earnings were impacted by a build in the inventory that is related to new store openings as well as improved offerings at existing locations. This amounts to $0.938 billion over the past year or more than enough to fully offset any EPS weakness this quarter or next, and the next as well. Longer-term, the build in inventory will translate into sales and profits. Assuming inventory levels are at or near desirable levels we expect to see operating margin pressure ease and even reverse.
Short-Sellers, Dividends, Value, and Camping World
Camping World is a deep value and a very high yield trading at only 4.75X its earnings and paying out 8.8% in yield. Those numbers might be red flags if not for the company’s performance, the outlook, and the dividend health, not to mention the 46% short interest. The short interest alone is enough to explain the downtrend in prices and now could become the fuel for a rally. At the very least, we expect to see short-covering support upward movement in price action, at the best we would expect a very sharp short squeeze that could leave the stock up more than twice its current value.
The Technical Outlook: Camping World Is At A Turning Point
Camping World hit a bottom a few days before the Q1 results were released and is now at a turning point. The results sparked a surge in prices that was met by resistance and suggest the shorts aren’t ready to give up. This may lead to some volatility in the near term and a capitulation on the part of the bulls or the bears, whichever one comes out on top. Based on the results, the value, and the dividend, we think the bulls will win but there is no guarantee. If price action falls below $26 it could trend even lower, if price action moves above the short-term EMA it could trend higher.
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
