Wait For the Dip Before Buying Black Rifle Coffee Stock

Black Rifle Coffee (NYSE:BRCC) stock recently went public last month via a special purpose acquisition company (SPAC) deal. I was quite surprised by how well the stock has held its price. BRCC jumped nearly 43% on the company’s first day of de-SPACing. The stock had reached a high of $22 before dropping to its current price of $16.

The facade of the New York Stock Exchange is decorated for the listing via a SPAC of Black Rifle Coffee Company (BRCC)
Source: rblfmr / Shutterstock

Most SPACs have performed poorly post-merger in recent months. Therefore I was surprised by the warm reception the market had given to BRCC stock.

There are plenty of reasons to be excited about Black Rifle Coffee truth be told. The company has a strong brand and is presenting itself as a conservative alternative to Starbucks (NASDAQ:SBUX).

The strong growth rates lead me to think that something interesting could be brewing with the company. Ok, that’s enough coffee puns from me. Let’s get on with the analysis.

Black Rifle Coffee Has a Strong Niche

So what exactly is Black Rifle Coffee? The company was founded in 2014 by Evan Hafer, a former U.S. Army Green Beret. As a veteran-owned enterprise, Black Rifle takes to heart its mission to support veterans, active-duty military, and other law enforcement.

There is a wide variety of coffee products and apparel in the company’s shop. All of them are branded with military themes and a very Americana style. There’s a subscription-style service available as well where customers can get their favorite coffee on a schedule.

I usually like to read the reviews of companies to get a feel of what their customers are saying about them. By most accounts, Black Rifle Coffee makes a pretty good product. Most reviews I’ve seen are positive — with many reviewers highlighting the dark strong flavors. True to its image, Black Rifle Coffee tends to have more caffeine than the typical brand.

I understand the angle the company is approaching in the coffee industry. It is clearly serving itself as an alternative to the “hipster” style branding predominantly seen. The hipster style of branding may be alienating to right-leaning conservative Americans. Thus creating a small solid niche for Black Rifle Coffee to dominate.

Black Rifle Coffee Has Impressive Growth Rates

What makes BRCC stock exciting as an investment is the company’s growth trajectory. The company’s revenue has been increasing at a rapid rate — and management has aggressive targets for the future.

In 2019, the company had $82 million in sales. This jumped by around 100% to $164 million in 2020. In 2021 the company is estimated to have a revenue of $230 million which is a 40.4% increase. The company expects to be making $430.4 million in sales by 2023.

Black Rifle Coffee has a solid plan to drive this revenue growth. At the end of 2021, the company has 16 brick-and-mortar locations. This means that there is plenty of room to further expand its retail presence. The company’s digital footprint is very impressive. But an omnichannel approach could really super-charge sales.

According to the company’s presentation, opening new “outposts”, as they call it, leads to an increase in direct-to-consumer sales. Significant DTC sales growth was observed after the opening of the company’s San Antonio outpost. The sales growth was in the area within 5-minutes of a particular location.

The Bottom Line

The growth story for BRCC stock is very compelling. Unfortunately, I worry about the market timing of Black Rifle Coffee’s de-SPACing. If this were 2020, the narrative and future plans alone could propel BRCC stock to new highs. But this is a market, especially punishing for growth stocks.

I like Black Rifle Coffee but will only consider purchasing at the dips.

On the date of publication, Joseph Nograles 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.

Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.


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