Hospitality Firm Will Improve Guest Experience With AI And Year-Round Operations

Key Takeaways

• Emphasis on all-year operations and dynamic pricing targeting international guests could boost revenue and strengthen margins.
  
• Investments in AI and sustainability may enhance guest satisfaction, repeat visits, and brand appeal, positively impacting long-term revenue.
  
• Decreased bookings and costly projects could strain SkiStar's profitability and cash flow, compounded by potential execution risks in increasing lodging capacity.

Catalysts

Owns and operates Alpine ski resorts in Sweden and Norway.

• SkiStar is focusing on developing its all-year-round operations, which is expected to increase capacity and make destinations more attractive, thus potentially boosting revenue.
  
• The company is utilizing dynamic pricing and targeting international guests, who have a higher average spend, to strengthen its margins and grow revenue.
  
• SkiStar plans to increase the number of commercial beds, which could drive longer stays and enhance overall earnings.
  
• Investments in AI for guest experience improvements, such as managing lift queues, could enhance guest satisfaction and potentially lead to higher revenue through repeat visits.
  
• Emphasis on sustainability with initiatives like fossil-free ski destinations may appeal to environmentally-conscious consumers, enhancing the brand’s appeal and potentially impacting long-term revenue growth positively.

SkiStar Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming SkiStar's revenue will grow by 6.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.5% today to 14.8% in 3 years time.
• Analysts expect earnings to reach SEK 844.0 million (and earnings per share of SEK 9.4) by about February 2028, up from SEK 444.6 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.7x on those 2028 earnings, down from 30.0x today. This future PE is greater than the current PE for the GB Hospitality industry at 12.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.11%, as per the Simply Wall St company report.

SkiStar Future Earnings Per Share Growth

Risks

• Bookings have decreased by 3%, which could signal lower future revenues if the trend continues or the situation does not improve.
  
• The late Easter and resulting slower booking patterns could lead to reduced revenues for the latter part of the ski season if not mitigated.
  
• The projected turnover and costs related to taking over operations at Hogfjallshotellet in 2025 might strain profitability if the expected revenue of SEK 90 million does not materialize or if operational costs exceed initial estimates.
  
• Skeidalization strategy involves significant capital investment, as seen with sustainability initiatives and development projects, potentially impacting cash flow and overall net margins if these investments do not yield expected returns.
  
• The effort to convert cold beds to warm beds and increase lodging capacity carries execution risk, which could hinder revenue growth if not successful.

Valuation

• The analysts have a consensus price target of SEK182.5 for SkiStar based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK5.7 billion, earnings will come to SEK844.0 million, and it would be trading on a PE ratio of 20.7x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of SEK170.4, the analyst price target of SEK182.5 is 6.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.