The travel and resort businesses have been devastated by COVID-19 in 2020, but you wouldn't notice it by the price of Vail Resorts' (NYSE:MTN) stock. Shares are down a relatively modest 5.5% over the past year, despite a volatile ride. The market doesn't seem to think that, long-term, the pandemic is going to be a big hindrance to business.
What's wild is that Vail Resorts still hasn't seen the biggest impact of the pandemic. When North America shut down in March, it was nearing the end of the ski season and entering the slower summer season for its resorts. It's now that the "rubber hits the road," and I think investors may be too optimistic about the future for Vail Resorts.
Travel businesses have gotten hammered
There's no question that Vail's business has been hurt by COVID-19. Fiscal fourth quarter of 2020 revenue was down 68.4% to $77.2 million, and net loss was a whopping $153.6 million, or $3.82 per share. And some of the slowdown is going to be long-lasting.
Travel to Canada is still restricted and is likely to remain that way well into the upcoming ski season. That'll hamper results at Whistler.
There are also going to be far fewer events at Vail properties. Whether that's a wedding or a corporate outing, resorts are filled with travelers of all stripes all year. And if a segment of travelers is simply not going anywhere in 2020 and 2021, the business will suffer.
The good news
Through September 18, 2020, season-pass sales at Vail are up 18% on a unit basis versus a year ago and down 4% on a dollar basis. The numbers show good volume for unit sales, but the weak dollar figures reflect discounts for renewing season-pass holders because of shutdowns in the spring of 2020.
What we don't yet know is if the discounts just pushed renewals forward in the year, or if there's long-term demand investors can count on. Vail also has the advantage of being primarily an outdoor venue, so the main activities it offers, like skiing, should have a much lower risk of COVID-19 than other entertainment options. But travel will be down, and the high-margin weekend getaways won't likely be what they were a year ago. So, we don't know how bullish to be on the season-pass news.
Is Vail a buy today?
I have a hard time thinking Vail's business is going to snap back as quickly as investors seem to be hoping. I think it's highly likely that calendar 2020 will turn out to be a horrible year, and if current vaccine timelines hold, it's unlikely the pandemic will be over until the end of the usually lucrative ski season.
Those near-term struggles and the fact that investors haven't sold off shares since the pandemic began will keep me out of shares. This simply isn't a great buy today.