Skiing and snowboarding might be the regular pastime of more than 9 million Americans, but does that make Vail Resort stock a good investment?
Vail Resorts (NYSE: MTN) is an American mountain resort company. First founded back in the 1960s by Aspen ski patrol guides Pete Seibert and Earl Eaton, Vail has grown into a $7 billion operation that owns premium ski resorts in three countries.
The company is divided into three divisions:
- Mountain, which owns and operates its 37 resorts internationally
- Hospitality, which oversees its hotels, condos, and golf courses
- Development, which oversees its property development and real estate holdings.
Since going public more than two decades ago, the stock has grown more than 8-fold, with a CAGR of around 9.5%. Is the growth story over for Vail Resorts or is Vail stock still a buy?
The bull case for Vail Resorts:
- Undisputed Market Leader Vail Resorts is one of the top brands in the adventure sports industry. In the company’s 2019 investor presentation, it cited an online survey that asked U.S. participants of the first ski resort that came to mind when they thought of snowsports. The flagship Vail Resort and the Beaver Creek Resort (both in Colorado) came first, while other Vail-owned sites like Breckenbridge, Park City, and Whistler Blackcomb made up the rest of the top 5. Combined, these sites had roughly 8.4 million skier visits in 2019.
- Economic Moat One of the biggest advantages that Vail Resorts has is its economic moat. Unlike other industries like retail or SaaS, Vail’s core business is virtually impenetrable because new skiing mountains cannot just be built. Owning a portfolio of some of the most enviable ski locations across the world is an incredible economic moat to have and one that will insulate the company against any competitors in the space.
- Big Expansion There was a time when Vail Resorts derived most of its revenue from its Colorado resorts. Now, the company has a portfolio that is geographically diversified both domestically (resorts on both the east and west coasts of America) and internationally (resorts in Canada and Australia too). A lot of these new resorts were purchased in the past 5 years, with the company recently buying Peak Resorts for roughly $264 million — gaining 17 new U.S. ski areas.
The bear case for Vail Resorts:
- Climate: The obvious threat to Vail Resorts is Mother Nature and all of its resorts are entirely dependent on adequate snowfall for full operation. In Vail’s most recent earnings call, for example, CEO Robert Katz acknowledged that “resorts in the Pacific Northwest experienced the lowest snowfall in over 30 years through December 31st, 2019 resulting in very poor results through the early season and critical holiday period.” This significant and largely uncontrollable variant is mitigated somewhat by Vail’s focus on season passes, which promotes advanced purchase amongst consumers and provides a more solid stream of revenue, regardless of short-term weather patterns.
- Company Culture A good company culture is one of the key things we look for in an investment at MyWallSt, and while Vail Resorts does not appear to have any more issues, a quick look at some of the reviews on Glassdoor suggest that there might be some disgruntled employees based on the short-term, seasonal nature of the work. However, the company is regularly featured on Fortune’s ‘America’s Best Employers’ list, which shows it is doing something right.
So, should I buy Vail Resorts stock?:
An investment in Vail Resorts is an investment in some of the most scenic ski resorts across two continents. While short-term results might be affected by weather patterns (or, indeed, the ongoing coronavirus outbreak and its impact or travel), the company has a very strong standing in terms of its position in the industry.
In short, as long as there are winter sports, Vail Resorts will make money.
Vail Resorts owns 37 ski resorts across three countries, including
Vail Ski Resort, Colorado
Beaver Creek Resort, Colorado
Breckenbridge Ski Resort, Colorado
Keystone Resort, Colorado
Heavenly Mountain Resort, Lake Tahoe
Northstar California, California
Kirkwood Mountain Resort, California
Afton Alps, Minnesota
Park City Mountain Resort, Utah
Whistler Blackcomb, Canada
Falls Creek, Australia
Hotham Alpine Resort, Australia
Vail Resorts went public in February 1997 at a price of $22 per share.
Vail Resorts pays a dividend of $1.76 per share, or roughly a 3.60% annual dividend yield.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in Vail Resorts. Read our full disclosure policy here.