What do plant-based foods, electric vehicles, and online shopping have in common?
They are all consumer megatrends.
That is, they each represent fundamental shifts in consumer behavior to a new normal of consumption.
From animal-based proteins and fatty foods to plant-based meat and organic snacks.
From polluting diesel cars to green electric vehicles.
From shopping at malls to shopping online.
Of course, as an investor, you want to invest early in these consumer megatrends. And in The Daily 10X, I tell my readers how to take advantage these megatrends with explosive small-cap stocks.
But… one problem with all of these consumer megatrends is that everyone knows about them.
And because everyone knows about them, investors are rushing into names on the right side of these megatrends.
This rushing sometimes pushes strong consumer stocks into overvalued territory.
If only there was a small-cap stock to play a consumer megatrend which doesn’t benefit from this “rushing” dynamic…
There is… in the seldomly talked about but still very robust RV consumer megatrend… wherein — because of various demographic, societal and global health shifts — consumer adoption of RVs is booming.
In today’s Trade of the Day, we’re looking at a small-cap stock that is simultaneously a play on a powerful consumer megatrend and attractively undervalued — a combination which could spark multi-bagger gains in the stock.
The Market Share Gainer in a Booming RV Market
The RV market is booming — and this boom isn’t going to die down anytime soon.
Over the past four decades, U.S. RV unit sales volumes have grown at a 3% compounded annual growth rate. From 2010 to 2017, that growth rate accelerated to 11% per year. In July 2020, U.S. RV unit sales rose an astounding 54% year-over-year.
What’s going on here?
- Millennials. To young folks, travel isn’t a once-a-year thing you do with your family. It’s part of their lifestyle. As these travel-hungry young folks are coming into more purchasing power, they are driving significant growth in RV sales (since RVs offer a cool and ultra-flexible way to travel).
- Covid-19. Amid the pandemic, enterprises have shifted to work-from-home environments, so employees can now literally work from anywhere. In that environment, consumers can rent/buy RVs and see the world while still working remotely — and many people are doing just that.
- Zero rates. With rates slashed to zero, financing on big-ticket items (like RVs) is now more attractive than ever.
All three of these tailwinds are here to stay.
Millennials are only getting richer and more travel hungry. The future of work includes a hybrid of in-office and remote work. And the U.S. Federal Reserve has committed to keeping rates at zero for at least three years.
So… the writing is on the wall… the booming RV market of 2020 is going to keep booming for several years.
That is fantastic news for Lazydays Holdings (NASDAQ:LAZY), a small and undervalued $120 million RV dealership that is rapidly expanding its geographic reach and has a compelling opportunity to explode higher alongside this booming market over the next few years.
The story here is very simple.
The RV market is going to boom between 2020 and 2025. It will increasingly be powered by first-time Millennial RV buyers. These buyers are novices in the RV space. They’re going to need help picking an RV. So, they are going to go to RV dealerships to buy RVs.
Importantly, Millennials are notoriously brand-driven, and there are really only two nationally recognized brands in the RV dealership space: Camping World (NYSE:CWH) and Lazydays.
To that extent, Camping World and Lazydays are going to sell a lot of RVs over the next few years.
Camping World is the Goliath of the space. Over 150 dealerships. Sold more than 100,000 RVs in 2019. A $3 billion market cap.
Lazydays is the David. Just 8 dealership locations. About 7,500 RV unit sales in 2019. A $120 million market cap.
But David is making moves.
Lazydays is opening up three new dealerships over the next few months in new geographies. One in Phoenix. One in Indiana. One in Tennessee.
The company also opened up its first full-scale service center in Houston back in February, brought on a Chief Marketing Officer to advance brand awareness in March, and has been busy improving the online shopping/browsing experience during the pandemic.
In other words, Lazydays is putting itself in an optimal position to gain market share in the booming RV space over the next few years.
Indeed, this is already happening.
In the first half of 2020, Lazydays’ new RV unit sales rose 27%, while total revenues rose 19%. In July, unit sales rose 48%, while revenues soared 62% higher.
It’s no wonder Lazydays stock has surged 215% in 2020 on heavy volume.
This rally is far from over.
As Lazydays continues to gain share in the booming RV market over the next few years through geographic expansion, omni-channel buildout and more service centers, the company will grow its sales volumes from ~7,500 RVs in 2019…. to 20,000+ by 2025.
My numbers say that — if that does happen — Lazydays will be a $1.2 billion revenue and $40 million net profit company by 2025.
Automotive retail stocks normally trade at 15X forward earnings. That average multiple on $40 million in profits implies a $600 million market cap for Lazydays by 2024.
If these same market share expansion dynamics persist into 2030, Lazydays could easily turn into a billion-dollar company.
The market cap sits at just $120 million today.
So… if you’re looking for an under-the-radar yet still hugely explosive investment opportunity over the next few years… Lazydays stock could be your answer.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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