Shares of recreational vehicle (RV) company Camping World Holdings (CWH -10.20%) crashed on Friday, after an analyst lowered their price target in a research note. The 2% decline for the S&P 500 wasn’t helping either. As of 1:10 p.m. ET, Camping World stock was down 10%.
Truist analyst Michael Swartz has been busily researching the state of the RV market, which led him to lower his target price for Camping World stock. According to The Fly, Swartz lowered his price target from $30 per share to $25 per share.
The crux of Swartz’s argument is that slow RV sales can lead to price reductions. And price reductions result in lower profit margins for companies like Camping World. The market was likely far more concerned with this commentary than it was with the lower price target.
When Camping World reported financial results for the second quarter of 2022, it didn’t appear to share Swartz’s sentiment regarding the RV market. Management noted its record revenue of $3.8 billion in the first half of the year. Revenue for new vehicles was up slightly but had mostly plateaued.
However, the company was making up for it with robust sales of used RVs. In the first half of 2022, revenue for used vehicles was up 27% from the comparable period of 2021.
Camping World’s management expects the trend toward used vehicles to continue. But it doesn’t expect a broad market pullback. CEO Mark Lemonis was talking about the RV lifestyle in the Q2 conference call. Regarding whether people would stop using RVs, Lemonis said, “Never happened before, through any gas crisis, through any interest rate crisis, or any war or anything, it’s never happened.”
Therefore, it seems Camping World’s own outlook as far more optimistic than the market’s right now.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Camping World Holdings and recommends the following options: short September 2022 $27 puts on Camping World Holdings. The Motley Fool has a disclosure policy.