Shares of Black Rifle Coffee (NYSE:BRCC), a company with a clear purpose and a strong fanbase, began trading publicly earlier this month. BRCC stock took over from special purpose acquisition company (SPAC) SilverBox Engaged Merger Corp.
That clear purpose and strong fanbase are clear advantages for the company as it begins its life as a publicly traded entity. However, SPAC debuts have proven rocky over the past few quarters. That’s why investors should wait for the dust to settle before moving into BRCC stock.
Strong Subscription Model
The case for investing in Black Rifle Coffee is fairly clear: It has a strong product that it has marketed wisely. It sells coffee primarily through a subscription model and boasts 285,000 coffee club subscribers.
The company was founded by CEO Evan Hafer, a former Green Beret. He made sure that his company serves a purpose he feels passionate about. The company’s mission is to serve premium coffee and content to active military, veterans, first responders, and those who love America. They’ve even trade marked the tagline “We Are America’s Coffee.”
In this day and age, that’s an particularly polarizing message. It will attract certain capital and customers, and it will repel certain capital and customer. Nothing new there. We see the same idea play out with Palantir (NYSE:PLTR) and Digital World Acquisition Corp (NASDAQ:DWAC) as but a few examples.
The reason investors should exercise caution is that BRCC is in a volatile period.
Black Rifle shares came to market strong, predictably jumping 50% higher on their debut. That size move isn’t unusual for SPAC-funded firms. But there’s little telling how long they can maintain the positive momentum.
Investors recently watched as Rivian (NASDAQ:RIVN) stock rocketed upward only to crash soon after its debut. That is just one example but it shows how volatile blank-check stocks are in their first weeks and months as publicly traded entities.
There isn’t much to dislike about Black Rifle Company from a fundamentals perspective. The company expects to report $230 million in revenues in 2021. It reported $82 million in net sales just two years earlier, in 2019. That figure represents a 67% compound annual growth rate over that period. The company has given guidance that it expects a 37% compound annual growth rate through 2023.
The figures are similarly strong for its profitability. The company recorded a $36 million profit in 2019. That profit should reach $92 million in 2021 and $187 million by 2023.
It all points to a strong, stable firm with a real mission. That mission warrants revisiting because it’s integral to the firm’s future.
Black Rifle Coffee is all about the military and first responder communities. In 2021 the company will donate over $3 million worth of coffee to those communities. And it has a goal to hire more than 10,000 veterans long-term. 50% of its workforce are veterans or veteran spouses.
In return, as management’s January investor presentation showed, BRCC’s support for the military and veterans was the top reason (84% of those surveyed) why consumers purchased Black Rifle’s coffee offerings.
The positive is that as long as capital continues to move in line with polarizing causes, BRCC stock should be fine. The company is clearly aligned with the right and more conservative values. I’m not sure there’s any information that suggests the stock market is becoming less polarized along political lines. However, I’m simply raising the idea that if it does stocks like BRCC could suffer.
What to Do on BRCC Stock
BRCC stock represents a fundamentally sound company. That much is very clear. But it’s also in a volatile period as the stock market digests what to make of it in the post-merger period.
I would just wait for it to settle to some degree before moving in because post-SPAC firms can move quickly in the wrong direction. Black Rifle Coffee has built a strong business with a strong following and that sets it up for a solid future in the stock market.
On the date of publication, Alex Sirois 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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.