If anyone can stomach travel this winter, it's probably the type of person who hurtles down mountainsides at breakneck speed for fun and excitement. This is why a few ski stocks might peak.
While it's still too early to get a read on this year's snowfall -- Colorado has seen a few inches of powder and parts of California have gotten a dusting -- skiers are making plans. And even with travel fears compounding seemingly by the day, lowering traffic in some spots, analysts say the season still holds potential.
"Mountain resorts are widely viewed as safe places to travel," said Stephen Forgacs, a spokesman for
( IDR), which operates resorts in the U.S. and Canada. Further, skiers and snowboarders tend not to be the mostcautious types. "Many of them are 25 to 35 years old and less influenced by political instability," he said.
Business is down slightly from last year, reports Charles Unagast, store manager of Princeton Ski Shop in Elmsford, N.Y. "But it's better than we expected it to be right now," he said. From what he's heard, local skiers are planning day trips, rather than longer journeys. That's a trend that could be exacerbated by Monday's airline disaster in New York.
Nevertheless, for travelers who are willing to go the distance, there are deals to be had. Web sites are offering discounted rates for lodging and savings on lift tickets, too.
Snow Must Go On
"Leisure names have retracted considerably since Sept. 11," said Marc Falcone, an analyst at Bear Stearns, in an interview last Friday. "They probably corrected appropriately, given fears about travel and the economy. But ski stocks consistently outperform expectations and grow earnings." Bear Stearns has done banking for
Since Sept. 10,
has fallen 23% to $14.20, where it closed on Monday. Vail has shed 5% to $18. And
( SKI) has lost 4.8% to $1.
In evaluating ski companies, analysts look to so-called "resort EBITDA," or earnings before interest, taxes, depreciation and amortization. This measure excludes real estate and other investments. And it corrects for the effect of seasonality on quarterly results.
Vail currently trades at 6.7 times resort EBITDA, according to Bryan Maher, an analyst at Credit Lyonnais. He thinks the shares are worth 8.5times resort EBITDA, leading to his 12-month price target of $24. Maher rates the stock a buy. Credit Lyonnais has a banking relationship with Vail and Intrawest.
Vail owns four Colorado ski resorts including Vail Mountain, Beaver Creek, Breckenridge and Keystone, as well as the Grand Teton Lodge in Wyoming. Close to 50% of the visitors to Vail resorts are "front-range" skiers, meaning they come by car. This year, the resort will target such travelers more than ever.
Intrawest, which reports first-quarter results Tuesday, has a big advantage in the upcoming season because 80% to 85% of its clientele drives to the resorts. Thus, fears of flying are even less likely to impact the company's operations. Nearly 100% of the visitors to Stratton, Mammoth, Mountain Creek, and Snowshoe drive to those resorts. The biggest exception is Whistler/Blackomb, where only 55% of the visitors come by car.
"Intrawest is not trading at a level that reflects earnings growth," said Falcone of Bear Stearns. According to him, the market is valuingthe stock at a multiple of 6.5 times EBITDA, which includes real-estate investments. He thinks it's worth about 8 times EBITDA. Falcone has a 12-month price target of $22 on the stock and rates it a buy.
Stacy Forbes, an analyst at Janco Partners, a Colorado-based investment bank, thinks Vail and Intrawest represent good long-term values. "The stocks have settled in at this point," she said last Friday. "There is limited downside from where they are trading today." (Janco Partners has a banking relationship with Vail.)
Among the three publicly traded ski resorts, analysts are least optimistic about
( SKI), which has been selling some of its assets. It recently got rid of Sugarbush in Vermont. And, according to a company spokesman, the resort has received a letter of intent for Steamboat, in Colorado.
Some of American Skiing's other resorts include Killington, Sunday River, and Mount Snow, all in the Northeast. The company has some good assets, analysts say. But given the murk created by the asset sales, which could imply overleveraging, smoother slopes can be found elsewhere.