- BRCC stock has attracted its fair share of bulls and bears
- Operating a niche-specific business gives it an edge
- Long-term outlook remains promising
Black Rifle Coffee (NYSE:BRCC) stock is rebounding after shedding some of its post-SPAC gains. Improved investor sentiment toward packaged food stocks helped initiate a snap-back. Moreover, upbeat guidance helped lift the stock by over 15% in the past week.
BRCC has been a divisive stock, attracting conflicting opinions from analysts. A lot of it is due to its community-focused brand, which caters to a specific subset of the population. It has positioned itself as a premium coffee brand designed to appeal to veterans and conservatives. In 2020, sales doubled to $164 million, helped by the lockdown restrictions in place during the pandemic and the company’s effective e-commerce positioning.
Some analysts believe that its niche-based strategy could backfire as it looks to expand its business. However, I think the opposite is true, as its community-driven approach might give it a unique edge over its competition.
| BRCC | Black Rifle Coffee | $20.84 |
Veteran-Focus Gives it an Edge
BRCC aims to support veterans, first responders, and military personnel with its business. The company is run by veterans and was founded by a former Green Beret, the current chief executive officer (CEO). Moreover, its employee base is primarily composed of veterans, veteran spouses, and related personnel. Its long-term objective is to hire a whopping 10,000 veterans.
The bears feel that the company’s veteran-focused approach will potentially limit its growth prospects. Moreover, even if it plans to change things up, it will likely draw ire from the opposite end of the political spectrum.
However, I feel that its clear-cut stance will help it build a loyal customer base over the long-term. Also, BRCC estimates its addressable market is around $28 billion.
We have also seen how active BRCC has been in cultural and political issues. It has a clear right-wing slant in its views, which attracts a whole new population segment.
Conservatism is still the dominant ideology in the United States. In a 2020 Gallup Poll, most Americans identified themselves as conservatives or moderates. Hence, the company may be looking at an even larger addressable market.
Positive Outlook Ahead
Black Rifle recently posted its fourth-quarter results. It saw its revenues jump almost 20% to $71.8 million from the prior-year quarter. Moreover, the company bumped its revenue guidance by $4 million to $315 million for 2022. According to BRCC founder and CEO Evan Hafer, “Growing customer enthusiasm for our coffee and mission continues to drive strong results as we increase brand awareness.”
However, it generated a hefty loss of $4.6 million compared with a net income of $976,000 in the same period last year. The hemorrhaging losses were primarily due to a shift in its sales toward wholesale. Also, higher shipping and production costs due to the rampant inflation rates weighed-down its profitability. Consequently, gross profit margins narrowed down to 34.4% from 40%.
Wholesale and franchise-based sales (outposts) will play a huge role in expanding the company’s top line. It targets a $200 million increase in revenues over the next two years and over 80% will come from the outpost and wholesale channels. Outposts, in particular, can play a major role in deepening perceptions about BRCC being a lifestyle brand.
Bottom Line on BRCC Stock
BRCC is relatively early in its overall lifecycle, but has exhibited incredible promise. Its niche-focused business generated robust sales last year and is poised for another strong showing in 2022.
The next couple of years will be mighty interesting for the company as it looks to expand its business. It will be looking to build brand equity by opening up new outposts and its effective media business. The company’s distinct branding techniques will be key in building awareness for its brand.
Profitability will be a concern, though, as it grapples with the rising inflation rates. Moreover, it will also have to incur substantial costs in expanding its operations in the coming years. Despite the risks, BRCC stock’s bull case is more compelling at this stage.
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
