Camping World Holdings (CWH 0.80%) Investors lost ground this week on a bearish market. Shares fell 14% through Thursday trading, according to data from S&P Global Market Intelligence, compared with a 2.7% plunge in the broader market. That slump contributed to a tough year for owners of the recreational vehicle seller, whose shares are down over 40% so far in 2022.
The decline came as investors became more pessimistic about the near-term outlook for the industry.
Camping World Holdings stock has been pressured by news from a competitor that indicates further pain for the RV industry. Thor Industries said this week that sales fell 22% in the sales period that ended in late October. Rising interest rates and additional pressure on consumer spending from inflation have reduced demand for discretionary purchases such as RVs.
Thor Industries is also expecting a significant drop in sales for the current financial year. The weaker outlook for the RV industry understandably weighed on shares in Camping World Holding as it likely means lower sales and earnings for the company in 2023.
Investors can expect similarly weak results from Camping World Holdings over the next few quarters as the industry moves through a cyclical downturn. Such swings are common, however, and don’t challenge the long-term investment thesis for an auto stock.
The biggest challenge for the company is to cut costs and reduce inventory levels to better match current demand. Camping World Holdings must achieve this goal without sacrificing future growth, for example by cutting production volumes too much.
The company has managed this equilibrium in previous pullbacks and will likely do so this time as well. However, Wall Street is more focused on the high probability of weaker results into at least the first half of 2023.
Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Camping World and recommends the following options: short December 2022 $24 puts on Camping World. The Motley Fool has a disclosure policy.