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Why The Marcus Corporation Could Deliver Supercharged Earnings

By Eric Novinson - Jul 16, 2014 at 2:05PM

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This regional hotel and movie theater owner has upgraded its resorts to cater to electric car owners.

Tesla Motors (TSLA -6.63%) has been building out supercharger stations around the world which allow drivers to rapidly recharge their vehicles. Earlier this year, the company made a major breakthrough when it proved that a driver could now cross the entire United States while recharging at its supercharger stations. While this was an important proof of concept for the electric auto maker, it could result in higher revenue for hotels owned by The Marcus Corporation (MCS 1.25%) as well.

The supercharger network
While Tesla has rapidly expanded the reach of its supercharger network, these stations are much less common than gas stations, at least for now. Back in April, Tesla announced that it had opened up 100 supercharger stations worldwide.  On July 11th, an article claimed that the electric car company had hit 100 supercharger stations in the United States. A map of these stations shows locations up and down the East and West Coasts, with another string of stations across the country that make rapid coast-to-coast transportation possible.

The Marcus Corporation owns 19 hotels and resorts, and on June 16th it announced that it had installed supercharger stations at 13 of them. This is an impressive achievement, as it means that the company has superchargers at two-thirds of its properties, something that its larger peers in the hotel industry can't boast. The Marcus Corporation also has slightly more than one eighth of the supercharger stations in the entire country located at its hotels, which could be a big draw for certain guests.

Tesla owner demographics
The Marcus Corporation thinks that its superchargers could attract Tesla drivers on summer vacation. If this happens, the company could bring in guests with cash to spend. The base Model S starts at $69,900 according to Google, and additional features can bring its price up to $100,000. As you might expect, this means that Tesla drivers tend to have high incomes. More than 77% of Model S drivers make more than $100,000 per year. This is a great demographic for a company that manages several high-end Hilton resorts, among other hotels. The locations of these resorts could help The Marcus Corporation attract these guests as well.

Regional presence
The Marcus Corporation primarily operates in the Midwest, with several of its resorts based in Wisconsin. This geographic setup could give the hotel chain a longer lasting advantage. Right now, the supercharger network offers a path between the coasts, but it doesn't extend everywhere in the country. Several states don't have any supercharger stations right now. A Tesla driver who wants to cross the country only has a few routes available, which probably means staying at hotels along these routes -- and the hotels with the superchargers have the advantage in this competition. While the electric car company will add more stations in 2015, even with expanded geographic coverage drivers will still have a limited number of cross country routes available.

The investment opportunity
At first glance, the valuation of The Marcus Corporation does not look that appealing. The company has a trailing P/E of 21, above the market average. It also has a forward P/E of 21, so analysts don't expect any earnings growth from it in the near future, although its five-year PEG of 1.43 does suggest longer term earnings growth potential. However, this also means that The Marcus Corporation could surprise the market, as this is a small company and analysts may have overlooked this news. While its stock has risen from around $17 to around $19 since the announcement, the rally started about a week after the announcement so it may have occurred for another reason.

Foolish takeaway
Luxury stocks have done very well recently, and The Marcus Corporation has a relatively unique draw for this crowd. The upcoming earnings report (it has scheduled its earnings call for July 24) will show whether the supercharger stations brought in wealthy summer travelers. While the overall performance of the company also depends on its movie theater segment, its upgraded food offerings and new loyalty program should help in that regard. Tesla drivers could provide the icing on the cake for this theater and hotel operator.

Eric Novinson owns shares of The Marcus. The Motley Fool recommends Google (C shares) and Tesla Motors. The Motley Fool owns shares of Google (C shares) and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Marcus Corporation Stock Quote
The Marcus Corporation
MCS
$17.83 (1.25%) $0.22
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$864.51 (-6.63%) $-61.39
Hilton Worldwide Holdings Inc. Stock Quote
Hilton Worldwide Holdings Inc.
HLT
$130.32 (-0.56%) $0.73
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$118.22 (-0.55%) $0.65

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