Despite the positive spin that many RV industry manufacturers are putting on how high gas prices are theoretically not affecting RVers, stock price numbers don’t lie. Three major players in the market, Thor Industries, Winnebago, and Camping World, have seen their stock prices drop over the last several months.
There’s been more trumpeting by industry over the remarkable record 2021 sales figures than in a herd of elephants, true. But hang on, the projections are that sales this year will fall a steep 8.4%. That sobering figure is from the RV Industry Association’s market report, published in May.
Stock market talking head issues warning
Last week, a talking head from Jefferies Financial Group, Bret Jordan, told Yahoo Finance Live that things weren’t particularly rosy for the RV industry. “It’s a compounding effect of inflation, whether it’s gas, or milk, or heating, or rent. All of this is sort of draining the consumer’s liquidity,” Jordan pointed out. “And, obviously, when you’re at the pump and you’re putting $100 into your tank when it used to be $25 or $30, it really strikes home.”
Jefferies is a financial services company that works in direct investing and asset management. Bret Jordan suggested that investments in RV companies are “dead money.” That’s a stock market term for an investment that has shown little or no growth for a long term. It can also be a red-flag term for investors who might be thinking about buying shares. Why does Jordan see RV industry investments as dead money? He says indications are pointing to a potential recession next year that could create real problems for the RV industry for at least six months.
Jordan also told Yahoo Finance, “They [RV stocks] are trading at very low optical valuations in the sense that five plus times earnings on current year would seem to be extraordinarily cheap. But current year earnings are, in Winnebago’s case, four times with earned in 2019,” Jordan said. “So they are arguably over-earning. And until people can make a decision as to how big the downturn is and what the normalized earning rate is going to be, it seems a bit dead money.”
“Good news/bad news”
In a “good news/bad news” scenario, travel industry hawks AAA found in a recent survey that planned travel for the rest of the year is at a 40-year low. For RVers who are still planning trips, that could mean fewer crowds to cope with, and more access to camping. But if that record low projection for trips were reflected in RV purchases, woe be it for the Mom-and-Pop RV retailer.
The big boost to last year’s surge in RV sales was also mixed. COVID isolation spurred many on to wanting to get up, get out, and get away. Hence, a big push in RV sales. But much of those sales were in “entry level” RVs—not the big-buck makers that the RV industry would prefer to pedal.