Shares of Camping World Holdings (CWH 2.59%) traded up more than 14% on Monday afternoon after a prominent investor talked up the stock during an interview. The gains came on a day when markets were already feeling optimistic about the U.S. soon beginning to reopen following the COVID-19 pandemic.
Camping World, a leader in recreational vehicle (RV) sales, has been hit hard by the pandemic, with shares off by nearly 40% even after Monday's gains on concerns that the U.S. economy post-pandemic will fall into a recession. The fear is that consumers tend to put off large discretionary purchases at times of economic uncertainty, and few will want to invest in an RV until the economy recovers.
In an interview posted Monday, investor Marc Cohodes said he is a believer in the stock, arguing that when the shelter-in-place orders are lifted, camping is going to be one of the few viable options for U.S. consumers looking to take a summer vacation.
"Look at this summer: no baseball, no summer camps, no cruising, no trips to Europe," Cohodes said. "What there will be is camping. Camping is going to be a big theme."
He concedes a recession might weigh on RV sales but said Camping World, thanks to its size, is well positioned to benefit from an industry shakeout that puts smaller retailers out of business. The biggest factors driving RV sales, he argues, are interest rates and fuel prices. With both hitting multiyear lows, he sees sales rising in the months to come.
"When RV stocks go, they go big and they go hard," Cohodes said. "These stocks are hugely profitable when they work, and not great when they don't work. I think the super-cycle is in front of us."
Worth noting is that Camping World is driving into this potential recession with nearly $3 billion debt on its balance sheet. Of course, those same low interest rates that could help spark sales also should help the company survive its debt load, and most of its maturities are a few years out.
Camping World is trying to dig out from under an ill-fated decision to buy the Gander Outdoors brand, and is in the early stages of a turnaround plan. But Cohodes is correct in saying it is a market leader in RVs. If he is also right that RV sales are about to take off, Camping World shares have plenty of room to climb from here.