Is Lazydays Holdings a Hidden Gem Among the Bottom 100 Stocks to Buy?
On Monday, Lazydays Holdings (GORV) jumped into Barchart's Bottom 100 Stocks to Buy in the 69th spot. Down 73% year-to-date, the operator of 14 RV dealerships once traded over $100.
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Naturally, my first reaction is that this is a business ready for the garbage bin. Bankruptcy imminent. However, my curiosity has gotten the best of me.
While I have no understanding of the issues that have plagued its business, which have led to significant shareholder destruction, I can't help but wonder if this is a hidden gem that speculative and patient investors should examine more closely.
Here's my two cents.
The three most significant issues facing the company are excessive debt, poor sales, and compliance issues.
According to S&P Global Market Intelligence, Lazydays has an Altman-Z score of 0.88. The score indicates the likelihood of a bankruptcy within the next 24 months. A score of less than 1.81 is considered distressed and vulnerable to bankruptcy proceedings.
The company's net debt as of March 31 was $330.3 million, nearly 12 times its $28.2 million market cap. It has paid out $45.5 million in interest over the trailing 12 months, which is 5.9% of its $767.3 million in revenue.
Unsurprisingly, it generates an operating loss. There is some good news on this front. I'll get to it shortly.
The second issue is poor sales.
In 2022, Lazydays' sales reached $1.33 billion, the highest since the company went public via a special purpose acquisition company (SPAC) in 2018. The combination with Andina Acquisition II valued the business at $203.7 million or 6.9 times its 2017 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Lazydays' 2016 sales were $564 million, generated from five dealerships, with $25.3 million in adjusted EBITDA. Its net debt of $91.6 million was a reasonable 45% of its enterprise value (EV) on a pro forma basis.
It went public to access growth capital. And grow it did, but at the expense of profits.
Lastly, as a result of the two previous issues, GORV stock collapsed, pushing its minimum bid price below $1 for 30 consecutive business days, thereby violating Nasdaq's minimum bid price requirement. That notice was in January.
On July 11, the company completed a 1-for-30 reverse stock split, which is why its shares are no longer in penny-stock territory, trading above $5.
The three issues explain the dramatic decline in its share price. The odds of it pulling out of its downward spiral are low.
When you are speculating about a broken-down business, you must imagine it as a fully-functioning, profitable and growing enterprise. That's easier said than done.
So, let's consider the bright side.
On the debt front, it has sold off several dealerships over the past year to reduce its debt obligations. This process began in earnest last November with the sale of seven dealerships and real estate to Camping World Holdings (CWH), America's largest dealership network, for $65 million. It also sold off an eighth dealership for $8 million.
At the same time, it raised $30 million through a private investment in public equity (PIPE) offering to two investment firms. It also completed a rights offering in February, raising an additional $37 million in much-needed funding.
In 2025, it sold seven locations, bringing its dealer footprint to 14 in nine states. Most importantly, interim CEO Ron Fleming was made the company's permanent chief executive on July 9.
'Since assuming the role of Interim CEO, Ron has led Lazydays with vision and passion, implementing an operational turnaround plan and executing a series of transactions meant to stabilize the business and position it for the future,' stated Robert DeVincenzi, Chairman of the Board, in the company's press release.
Fleming worked at the company for 10 years, retiring in August 2023 as Senior Vice President of Operations. He was enticed back a year later to implement a turnaround as interim CEO. If Lazydays goes out of business, it won't be for his lack of trying.
Lazydays finished Q3 2024 with net debt of $535.2 million. Fleming's cut that by 38% to $330.3 million as of Q1 2025, with further reductions expected.
The company's all-time high was $772.20 (accounting for reverse split) on April 26, 2021. Its gross margin in Q1 2021 was 23.7%. In Q1 2025, the gross margin was 26.4%, which is a positive development.
However, the operating expenses in the first quarter were approximately the same as those in 2021, despite a $100 million decrease in revenue. Its operating costs need to align with those from 2021 if it has any chance of returning to operating profitability.
The selling, general, and administrative (SG&A) margin in the first quarter of 2021 was 13.9%. In the latest quarter, it was 23.3%, nearly 10 percentage points higher. Pile on the interest expense, and you've got a difficult, if not impossible, challenge.
Selling RVs isn't rocket science. You're providing a service for a very discretionary item. With interest rates expected to fall over the next year, demand is likely to remain healthy, if not record-setting. It depends on what happens with the economy due to tariffs and trade.
As for the company, it has a history of selling RVs in good times and bad. If it can rightsize the operating expenses, it has a shot.
The seven dealerships that Camping World acquired had an average annual revenue of $28.6 million. I'm going to assume that these seven were the cream of the crop. So, let's say the remaining 14 locations average about $25 million. That's $360 million in annual revenue moving forward.
Based on the 26.4% gross margin, its gross profit would be $95 million. Even with a high SG&A margin, it should be able to generate positive EBITDA in 2025. It might even be able to reach GAAP profitability with further work done on reducing its SG&A expenses.
If you're a speculative investor who's very risk tolerant, I don't see the harm in making a small wager that Fleming can successfully right the ship.
With the proper cost structure and debt levels, GORV could be a $10 stock within 6-12 months from now. But that's a big if.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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