Black Rifle Coffee Is Poised to Benefit From a Very Promising Niche


Black Rifle Coffee (NYSE:BRCC) stock has a great deal of potential and is a good growth stock to buy. My bullishness on the shares is largely, though not only, based on my understanding of the appeal that the company has for those with right-of-center political views.

Exterior of Black Rifle Coffee Company Store. BRCC stock.

Source: YuniqueB / Shutterstock

But also importantly, the company is generating strong growth and has reported promising profitability numbers, while the valuation of BRCC stock is quite reasonable.

Black Rifle’s Appeal for Conservatives

“People overwhelmingly want to buy from companies who share their values,” Black Rifle founder and CEO Evan Hafer said in a statement on the company’s fourth-quarter earnings press release.

I think that, for the majority of Americans in this era of very high political awareness and polarization, that is indeed the case. Very few consumers who closely follow politics (and I think that probably is the majority of Americans at this point) want their money to go to causes they find to be repugnant.

Consequently, right-wing Americans are likely to want to buy products from Black Rifle — which professes to be patriotic and is unlikely to support left-wing causes — than from, say, Starbucks (NASDAQ:SBUX), which some conservatives have decried.

At its stores, Black Rifle can also exploit a social factor. Specifically, in a polarized political environment, people often feel more comfortable socializing with those who have similar worldviews. As a result, some conservatives looking to socialize with like-minded individuals might find Black Rifle’s shops a good place to do so.

Black Rifle Has Posted Impressive Results

Last quarter, the company’s revenue rose 20% year-over-year, with its wholesale revenue climbing a very impressive 74% YOY and its shop revenue soaring 181% to $5.1 million. Also in Q4, Black Rifle opened four new stores, brining its total number of retail outlets to 16.

On the profitability front, Black Rifle’s EBITDA (earnings before interest, taxation, depreciation and amortization), excluding certain items, was a loss of $300,000. Importantly, my review of the company’s Q4 results indicates that it does not issue a great deal of share-based compensation, which is typically excluded from firms’ adjusted EBITDA figures but tends to meaningfully weigh down their stocks.

Moreover, Black Rifle expects its adjusted EBITDA to be positive this year, and the firm anticipates that its revenue will jump to $315 million this year, up from $233 million in 2021.

Black Rifle’s Outlook Is Positive

In reaction to Black Rifle’s Q4 results and guidance, Roth Capital hiked its price target on the shares to $20 from $13. The firm believes that consumers are pleased with the company’s “brand,” Seeking Alpha reported.

In 2022, the company intends to open 15-20 additional stores that it will own. Given the huge revenue increase that its stores registered last quarter, that expansion should greatly boost its top-line results. Additionally, since the company is looking to roughly double its store count this year, it’s likely that its stores are profitable. Consequently, the new stores should significantly increase its 2022 bottom line as well.

In other developments likely to boost Black Rifle and BRCC stock this year, the company noted that it addressed a capital shortfall with its $150 million stock offering in February, hired a number of top-level executives, and entered “advanced discussions” with a number of manufacturers that can alleviate its supply chain issues.

Moreover, the company should benefit from increased buzz, driven by mentions in right-wing media, business news websites, and social media, as well as by its own marketing efforts.

Valuation and the Bottom Line on BRCC Stock

Black Rife is trading at a forward price-sales ratio, based on analysts’ average 2022 sales estimate, of about three. That’s a reasonable valuation for a non-tech company that’s growing rapidly and has apparently found a very good niche to exploit.

Given the company’s multiple catalysts and the undemanding valuation of BRCC stock, I recommend that investors looking for a growth name outside of the tech sector buy the shares.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

Article printed from InvestorPlace Media,

©2023 InvestorPlace Media, LLC