'Open road' ahead for this retail stock as millennials snap up RVs, says BMO

Published Mon, Aug 14 201712:42 PM EDT

BMO Capital Markets sees an 'open road' ahead for Camping World Holdings after the outdoors equipment provider increased guidance and reported 20 percent sales growth in its second-quarter earnings report. "As the nation's largest retailer of recreational vehicles (RV) and related products and services, Camping World Holdings benefits from robust growth in the RV industry," wrote BMO analyst Gerrick Johnson. "While controlling only 6 percent of U.S. RV dealerships, the company has a significant scale advantage in purchasing, pricing, advertising, cross-selling and leverage, allowing it to sell 15% of the industry's new units." Controlling more and more of new unit sales through dealership acquisitions is critical for Camping World, as an increasing percentage of the population gravitates back toward road trips. There is a "strong view" in the industry that certain sectors of motorhome market are now successfully appealing to millennials. "New and used vehicle sales grew 21 percent to $959 million, better than our $869 million estimate," continued Johnson. "Growth in this segment is fueled by robust RV demand from younger consumers and first-time buyers." Johnson raised his 12-month price target on Camping World to $40, representing 15 percent upside from Friday's close. But BMO analysts have a second reason to hold their Camping World rating at outperform: Camping World recently acquired Gander Mountain. And while Camping World did not provide revenue or EBITDA guidance for Gander, it did comment that it expects scores of store openings by the end of 2018. "We are focused on locations that can offer all of our Gander, Overton's, Camping World and Good Sam products and services for the RV, boating and outdoor lifestyle," said Camping World CEO and host of CNBC's " The Profit " Marcus Lemonis during Thursday's earning's call. "With the first of these locations targeted to open in November and our continued acquisition efforts and our new store opening strategy, we intend to increase our borrowings in the coming weeks." Camping World shares have outperformed the market in the past six months, up 7.34 percent compared to the S & P 500's 5.49 percent rise.

Camping World Holdings Inc. signage is displayed as American Flags fly outside of the New York Stock Exchange (NYSE) during the company's initial public offering (IPO) in New York, U.S., on Friday, Oct. 7, 2016.

Michael Nagle | Bloomberg | Getty Images

"As the nation's largest retailer of recreational vehicles (RV) and related products and services, Camping World Holdings benefits from robust growth in the RV industry," wrote BMO analyst Gerrick Johnson.

"While controlling only 6 percent of U.S. RV dealerships, the company has a significant scale advantage in purchasing, pricing, advertising, cross-selling and leverage, allowing it to sell 15% of the industry's new units."

Controlling more and more of new unit sales through dealership acquisitions is critical for Camping World, as an increasing percentage of the population gravitates back toward road trips. There is a "strong view" in the industry that certain sectors of motorhome market are now successfully appealing to millennials.