Wall Street Goes Mild Over New IPO: Camping World Holdings Inc.

Today we're going to tell you about a stock -- one that you may not have heard of before, but one that a few analysts think you should like. Camping World Holdings (NYSE: CWH) is the stock's name, and recreational vehicles (RVs) are its game.

This morning, no fewer than six Wall Street analystsannounced new ratings for Camping World Holdings, splitting their ratings down the middle with three buy ratings and three holds. R.W. Baird, KeyBanc, and Credit Suisse all hail from the buy camp, while Wells Fargo, JPMorgan, and Goldman Sachs counsel holding the stock for now. And here's something that may surprise you: Each and every one of these bankers also helped to runCamping World Holdings' IPO last month!

Now, wouldn't you like to know what they really think about the stock? Then you're in luck. Read on, and find out.

Camping World loves the RV lifestyle -- but does Wall Street still love the stock? Image source: Camping World IPO prospectus.

Let loose the bulls

We'll let the bulls go first in this debate. Underwriting more than 688,000 Camping World shares, Credit Suisse tied as the stock's third-largest backer during last month's IPO. It's not too surprising, therefore, that Credit Suisse really likes this stock. Quoted on StreetInsider.com this morning, Credit Suisse rates Camping World stock an "outperform," and argues the company operates in a "fragmented industry," and offers "potential upside from higher EPS and multiple expansion." A seller of new and used RVs, Camping World also does good business selling insurance and other services to RV owners, a business model that Credit Suisse likes for its "recurring revenue model."

With its "low valuation" of just $412 million in market capitalization, and trailing net profits of $190 million, Credit Suisse sees Camping World as "one of the most attractive stories in the consumer space." The analyst predicts Camping World, currently priced at $22 and change, will hit $28 within a year.

For their parts, KeyBanc and R.W. Baird played lesser roles in the IPO -- but they're no less enthusiastic about the stock. According to data from ratings monitor TheFly.com, KeyBanc rates Camping World overweight with a $28 price target, while Baird says the stock will "outperform" and head to $27 a share.

Having second thoughts

What may interest investors even more than Camping World's enthusiasts, though, is the names of some of the analysts who once actively pushed investors to buy the stock, but whose own enthusiasm has now cooled.

Chief among these are Goldman Sachs and JPMorgan. Each banker underwrote nearly 4.1 million shares of Camping World stock, and so presumably liked the stock four weeks ago. But both of these bankers now rate the stock no better than neutral. Up only pennies from its Oct. 7 IPO price of $22, Goldman saysthat Camping World stock is worth at best $24 today. TheFly quotes Goldman warning investors that "decelerating" RV shipments industrywide "will likely weigh on the stock's multiple."

JPMorgan gives Camping World only slightly more credit, assigning a $25 price target to Camping World stock. Similarly, Wells Fargo ratesthe stock a "market perform," and says the stock is fairly valued anywhere in the range from $23 to $25 a share -- the lower price being only pennies more than what Camping World costs today, and just $1 above the price at which Wells was pushing the stock at its IPO!

A Foolish view

With Wall Street walking back its enthusiasm so soon after the IPO, investors may feel somewhat less than certain about Camping World's prospects today. So what's an investor to do -- panic and sell, or stick with the stock?

Here's how I look at the situation. Currently, Camping World stock sells for a P/E ratio of just 2.2. That may sound absurdly low, and imply that Camping World's recent profits are a fluke. In fact, though, Camping World's earnings don't look like a huge aberration to me. The company earned $190 million in net profits over the past 12 months, true. But it earned not much less ($178 million) in 2015 as a whole, and $125 million the year before that. Even valuing the stock on its earnings from two years ago, therefore, I can't call Camping World obviously overvalued at a mere 3.3 times 2014 earnings.

Meanwhile, analysts who have published estimates for the stock on S&P Global Market Intelligence agree Camping World is likely to grow its earnings at a modest 8% pace annually over the next five years. That doesn't seem like a lot to pay for a stock selling for 2.2 times earnings -- or even 3.3.

Granted, Camping World stock carries a heaping helping of debt -- $1.3 billion net of cash. Granted too, its cash flow statement is not without blemishes. (Free cash flow for the past 12 months, for example, amounts to only $97.5 million -- barely half of reported net income.) Weighing all these factors into consideration, there is reason for caution about the stock. But even so, I don't see any need to panic and sell just yet.

A secret billion-dollar stock opportunity The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early-in-the-know investors! To be one of them, just click here.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he currently ranks No. 333 out of more than 75,000 rated members.

The Motley Fool has no position in any of the stocks mentioned. 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.