Bank of America is breaking with overall bearish sentiment about Vail Resorts (MTN 1.67%) to predict a successful 2021 for the mountain resort and skiing company. The bank is maintaining its $350 price target for Vail, forecasting a more than 25% upside for the company over its share value at market close yesterday, while boosting its rating from neutral to buy according to The Fly and other sources.
Vail Resorts appeared to ski off a cliff yesterday in investor opinion after it announced it was slashing its Epic Pass prices by a full 20% or more. CEO Rob Katz proclaimed his company intends to "double down on our pass strategy by dramatically reducing our pass prices" and says he is "excited to make it easier for everyone to move into a pass." Prices dropped from $979 to $783 for a full pass and from $729 to $583 for a local pass.
Just a couple of weeks ago, the stock market rewarded Vail Resorts for improving metrics in its earnings report with a single-day 10% jump in its share value. However, the market reacted negatively to the pass price reduction, with the drop beginning yesterday and continuing into Thursday morning trading.
Bank of America's Shaun Kelley, however, thinks traders are overreacting and underselling Vail's profit potential for the 2021–2022 ski season. The analyst says Vail Resorts is "well positioned to benefit from high-end pent-up leisure demand," while describing the pass price cut as "a calculated move to increase customer loyalty and retention, long-term customer engagement and overall skiing accessibility." He said he expects earnings and valuation to climb and praised the high-altitude resort company as a "consumer industry pioneer."