What happened

Shares of Camping World Holdings (NYSE:CWH) were up more than 10% late Wednesday afternoon despite an analyst downgrade and fears of deterioration in the market for recreational vehicles. Tough market conditions are priced into the stock, and investors appear more focused on signs that the COVID-19 coronavirus-related slowdown might not persist as long as once feared.

So what

In one sense, Camping World could be viewed as a possible beneficiary of the pandemic if consumers decide to turn to camping instead of traveling on airplanes or staying in hotels. But buying an RV is a discretionary purchase, and the company's shares have been under pressure due to fears that the U.S. economy would fall into a recession and buyers would stay away. Even with Wednesday's rally, shares of Camping World have still lost half of their value year to date.

An RV parked in front of a picturesque lake.

Image source: Getty Images.

The broader markets have experienced a surge in recent days on reports that could suggest the pandemic-related issues could soon peak, with a leading U.S. health official on Wednesday saying that U.S. deaths from the virus could end up lower than the original 100,000 to 200,000 projected. Investors appear to be hoping that an end to the pandemic will lead to a quicker economic recovery, giving a lift to shares of Camping World and other retailers.

Investors need to be mindful that much of the optimism is speculation, and the pandemic remains a very serious issue that has led to thousands of deaths and major disruptions to the economy. It has also surely impacted Camping World's results.

Investment bank Northcoast downgraded Camping World shares on Wednesday to neutral from buy, with analyst Brandon Rolle saying in a note that channel checks reveal retail fundamentals have deteriorated and show elevated dealer inventories and order cancellations.

Now what

Hopefully, the green shoots that are pushing shares higher this week will continue, and we will soon be past the worst of the pandemic. But now is a time for caution on Camping World. The company had issues even before the pandemic, hit hard by an industrywide slowdown in RV sales made worse by an ill-fated decision to buy the Gander Outdoors brand

Camping World is in the early stages of a turnaround but is carrying nearly $3 billion in debt on its balance sheet. If buyers do stay away, Rolle warns that the company could run into cash issues in the quarters to come. And even in the best of scenarios, the company has a long journey ahead of it.