Shares of popular coffee maker Black Rifle Coffee Company (NYSE:BRCC) stock got a big boost on its first day of trading. BRCC stock is trading over 20% from its initial public offering(IPO) price, creating plenty of buzz in the market.
The right-wing veteran-focused coffee specialist has an intriguing story and lofty growth plans, which points to more strength ahead. Hence, it’s an excellent high-risk, high-reward play.
Black Rifle Coffee Company went public via a merger with shell company Silverbox Engaged Merger Corp. I. The arrangement is being compared to SPAC Digital World Acquisition’s (NASDAQ:DWAC) potential merger with Truth Social, another conservative-leaning business. Black Rifle’s deal is expected to provide a handsome $150 million in cash equivalents.
The company has some ambitious plans to grow its business with hopes that its brand will connect with millions of veterans and their families. With massive conservative support across the U.S., BRCC could potentially break through if it can marry quality with popularity.
Black Rifle Coffee Company was founded in 2014 by military veterans Evan and Green Hafer. The veteran-focused coffee producer primarily operates a direct-to-consumer model. Moreover, its products are also available in most top retail stores.
Additionally, it also owns franchised stores it terms as outposts. Looking ahead, it hopes to expand its outposts to 78 by 2023. These efforts will warrant issuing new debt and equity.
Black Rifle claims that its coffee is of a superior grade compared to its peers. Its Arabica coffee beans achieved an exceptional 83-point rating on the coffee grading scale developed by the Specialty Coffee Association of America.
The company estimates a colossal addressable market for its direct consumer business at roughly $4 billion. Its current revenue base at just $163 million, which represents approximately 4% market share at this time. Moreover, 84% of the company’s sales accrue to its direct-to-consumer model. Hence, there’s plenty of upside with its sales channels, and it has only scratched the surface with them.
Black Rifle’s commits to supporting the American military. Moreover, it plans to hire 10,000 U.S. veterans down the line. Hence, one would imagine the company having strong support among the military community.
With its support for the military pleasing both sides of the political spectrum, Black Rifle has exhibited a conservative slant. The company has been unabashed in its support for the Second Amendment Rights. Gun control has been a bone of contention in the U.S. political scene for the longest time, and the conservatives have been firmly in support of protecting the Second Amendment.
Moreover, we have also seen Black Rifle’s involvement in political debates. For instance, The New York Times asked co-founder Evan Hafer whether its business could “become the Starbucks of the right.” On top of that, the company has had a history of supporting former President Donald Trump throughout his tenure in office.
Having a solid customer base on the conservative side could be an ace in the hole for the company. We have seen immense polarization in the country in the past few years, which is likely to play in the hands of companies such as Black Rifle.
Nevertheless, it will have to expand its reach beyond the conservative side. Its challenging for the company to do so, but it could significantly increase its customer base.
The Bottom Line
Black Rifle is off to a solid start amidst brouhaha in the market. It has an ambitious plan to expand its business and is tapping into a customer segment that has been highly animated in recent years. The risks are evident with BRCC stock, but it can do some real damage in its sector.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.