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BRC Inc. or Black Rifle Coffee (stock ticker: BRCC) is operating in the Consumer Non-Durables sector with a focus on coffee manufacturing, as well as other types of beverage and food production. The company identifies itself as a rapidly growing and premium coffee manufacturer and retailer. The main mission of the firm is to support veterans and military staff
In the third quarter of 2023, BRC Inc. recorded a revenue of around USD 76 million with a year-on-year increase of about 25% which based on the management comments was largely driven by the continued success of the new Ready-To-Drink (RTD) market and new entrance to the Food, Drug and Mass (FDM) market. The firm also attributes some of the success in terms of revenue growth to the recent partnership with Walmart. (BRCC, 2023)
Despite a significant increase in the revenue numbers BRC Inc. failed to transform the revenue into profit since the bottom line presented was a net loss of about USD 16 million. BRC Inc. mentioned that the loss was due to major issues with the RTD production because the co-manufacturer failed to transform from a trial run to full production on time. It is expected that the same issue will affect the fourth quarter bottom line as well. This has also impacted the stock performance over 2023 as per the chart below.
BRC Inc. Stock Forecast 2023 and above
For 2023, our price prediction is that the stock is going to start the year around the same areas as its current price – around USD 6.4. It can hover between USD 5-7 given the fact that investors are digesting the most recent negative earnings surprise and issues with the go-live of the new product line.
Nevertheless, there is a long-term positive outlook for the company given the fact that there is an increased demand for the products as shown by the revenue increase for the third quarter in 2022. At the same time, the firm is growing organically and tapping into new markets such as FDM, at the same time targeting to enter other segments in the future. Last but not least, the newly established partnership with Walmart can have a long-term positive impact on the demand and support the future growth of brand awareness and the reputation of the company.
Based on the above analysis of BRC Inc.’s prospects, the long-term target for the company is positive. Further financial statement analysis of the third quarter results of 2022 indicates a strengthening trend in the overall fundamentals of the company.
The analysts covering the stock expect the price to be between USD 10-15 per share in the long term which is more than a 100% increase from the current level. The expectation should be based on the historical performance of the stock price since in April 2022 the stock reached its all-time high at around USD 33 per share based on some positive news about the executive team changes and new hires to increase the retail exposure of the firm.
However, due to the macroeconomic instability-high inflationary environment, rising interest rates as well as company-specific factors such as negative earnings due to the overall market uncertainty, consumer behaviour expectation, and issues with the new product line caused the stock price to become significantly undervalued and trading below the initial IPO price at the moment.
Overall technical analysis based on the Relative Strength Index (RSI), Moving Averages and Bollinger Bands show that the stock is currently under-priced as well.
BRC Inc. Stock 2022
The first quarter of 2022 marked another milestone in BRC Inc.’s journey as a publicly public corporation. Revenue grew 35% to $65.8 million in the first quarter of 2022, up from $48.8 million in the first quarter of 2021. Gross profit climbed 18% year on year to $23.2 million, or 35% of net revenue.
The second quarter of 2022 clearly demonstrated the advantages of BRC Inc’s omnichannel business model, as well as the significant growth they were experiencing in their Wholesale channel. Revenue grew 27% to $66.4 million in the second quarter of 2022, up from $52.4 million in the second quarter of 2021. The second quarter of 2022 had a 145% growth in wholesale revenue, from $9.8 million to $24.0 million.
There is a significant increase in current assets from USD 53 million – end of 2021 to around USD 140 million in 2022, vs a moderate increase in current liabilities from USD 60 million to USD 61 million which improved the liquidity position of the firm since the current ratio (current assets divided by current liabilities) increased from 0.9 to 2.3 thanks to significant growth in the cash and cash equivalents account and almost doubling of the inventory account.
Moreover, the total assets increased from USD 87 million in 2021 to USD 208 million in the third quarter of 2022 while the liabilities increased by only USD 10 million for the same period to USD 93 million. This made the liability-to-asset ratio decrease from 0.9 – at the end of 2021 to 0.3 in the third quarter of 2022. This was a significant improvement for the company’s financial arm..
BRC Inc. Stock 2021
The company had its IPO back in the spring of 2021 therefore there is no sufficient track record of the stock price history. Nevertheless, the stock price in 2021 hovered between USD 9.5 to 11.5 being relatively stable with only one jump in early November 2021 due to some rumours about a merger with SilverBox. Which was executed in February 2022 causing the V-shaped jumps and downs and higher trading prices in the first half of 2022.
The expectation for BRC Inc. in the near term is neutral given the issues with the new product line that is affecting the company’s bottom line.
However, since the company is building its financials while the revenue increase is speaking about the positive demand and the right direction of the company’s strategy, BRC Inc. should benefit long-term from the new product lines, new partnerships, and new market entrances.
At the same time, the growing strong financial arm of the company should bring more support for the stock price growth given the investors should react positively to the strong financial statements and strategic decisions of the company.
Why is BRC Inc. still losing money?
In the third quarter 2023 financial statement BRC Inc. mentioned that they had issues with Ready-To-Drink’s (RTD) new product line that is affecting the bottom line. The firm expects that some impact should be seen also on fourth-quarter 2023 results, however, the forecast is to see positive profitability at least from EBIDTA’s point of view.
Why is BRC Inc.’s stock price at such a low level?
BRC Inc. went public with a merger with SilverBox in February 2023 which caused some volatility in the stock price in the first half of 2023. Afterward, the negative earnings of the company were the main reason for the low stock price levels.
When should I expect an increase in the stock price?
One can never accurately time the market, so no date could be specified as a turning point for the stock price. The analysis is made given current information and it can be altered with the changes in the strategy or company decisions.
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