Please ensure Javascript is enabled for purposes of website accessibility

Why Vail Resorts Plummeted 30.5% in March

By Andrew Tseng – Updated Apr 6, 2020 at 11:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Do closed ski resorts mean a buying opportunity?

What happened

Shares of Vail Resorts (MTN 2.35%) tanked 30.5% last month, according to data from S&P Global Market Intelligence. That brought the stock from $213 per share all the way down to $148.

So what

Vail Resorts' stock tanked because the company is going through a rough time with the coronavirus outbreak. When the company reported its fiscal second-quarter 2020 results on March 9, it withdrew its previous financial guidance for the year because of the early negative trends it saw in its business and further uncertainty about the spread of the coronavirus.

On March 17, the company announced it was closing all of its North American ski resorts and retail stores for the remainder of the 2020-2021 ski season. 

A woman in ski gear smiling with a mountain in the background.

Image source: Getty Images.

The following day, the company announced the closure of its lodging properties as well and said the company's results for March and April would fall short on resort-reported EBITDA by $180 million to $200 million against the expectations the company had as of March 1.

Since then, the company has announced several initiatives to curtail costs while its properties are closed. The company is reducing its capital spending by $80 million to $85 million during calendar 2020. That includes the deferral of mostly discretionary projects, including new chair lifts, terrain expansions, and other mountain and base area improvements.

The company also announced the suspension of its dividend for the next two quarters, which will preserve $140 million, and the furlough of all of its year-round hourly employees in the U.S. for at least the next month. And for the next six months, employees will see 5% salary reductions, or up to 25% for top executives, while CEO Rob Katz will be forgoing his full salary and the board of directors will be refusing all cash compensation.

Now what

Vail Resorts appears to be making the right moves to cut expenses and preserve cash while its properties are closed. Every September, Vail receives an influx of cash from the sale of season passes. To the extent skiers expect to be skiing again during the winder of 2020-2021, Vail should see some boost to its cash coffers at that point.

Investors should consider Vail Resorts to be a well-managed, high-quality business that should bounce back over time as its customers return to the slopes. 

Andrew Tseng owns shares of Vail Resorts. The Motley Fool recommends Vail Resorts. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Vail Resorts, Inc. Stock Quote
Vail Resorts, Inc.
MTN
$208.70 (2.35%) $4.79

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.