BRC Inc. (Black Rifle Coffee)

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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 2022, 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, 2022)

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 2022 as per the chart below.

BRC Inc. Stock Forecast 2022 and above

For the remaining one and a half months of 2022, our price prediction is that the stock is going to close 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. 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 indicates a strengthening trend in the overall fundamentals of the company. 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 is improving the liquidity position of the firm since the current ratio (current assets divided by current liabilities) increases 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 makes the liability-to-asset ratio decrease from 0.9 – at the end of 2021 to 0.3 in the third quarter of 2022. This is a significant improvement for the company’s financial arm and should have a long-term positive impact on the stock price if it remains the same or becomes more robust.

Although the profitability ratios are still negative there is a positive increasing trend in the bottom line of the company which was affected this year due to the issues with the new product line. Based on the discussions of the managers in the financial statement for the third quarter, the company expects to have a net loss for the fourth quarter, however, the expectation is to increase the revenue to USD 500 million for the next year while generating a positive EBITDA for the same period.

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 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.

How to Invest in BRC Inc. Stock

Given the fact that BRC Inc. is a relatively small-cap stock, some of the brokers are not providing the trading opportunity to buy or sell the stock through their platforms. However, one of the few brokers that have the stock listed on its platform is Interactive Brokers (IBKR). From my point of view, this platform provides all the necessary tools to invest in stock and is comprehensive enough with various portfolio management tools. The platform is user-friendly and easy to navigate through, but at the same time can meet the requirement of professional traders.

Step 1: Open an Account

To open an account with Interactive Brokers navigate to the IBKR’s home webpage and click on the “Open Account” button in the top right corner. Once the drop-down menu appears select the “Start Application” option. In this application form webpage, you will be required to input your email address, username, and password as well as the country of residence and marketing preferences. Provide the data as applicable and click on the “Create Account” button at the bottom of the page.

In the next step, you will be asked to verify your email address with the link that you will receive to your email address provided in the previous step. Once done the login page of IBKR will pop up in your browser and you will be asked to provide your Username and Password created in the application form.  

After logging in, further details will be required from you such as – the type of account. You have to choose between Individual – meant for individuals who are the sole owner of the account, Joint – where there are two account holders and Retirement Account – which is for Individual Retirement Accounts (IRA) meant only for US tax residents. There are also other options for institutional investors that should be chosen if applicable.

In most cases for retail investors, it will be an Individual account so further steps describe this option in detail.

Once selected you will have to choose if you are the beneficiary owner of the funds and portfolio – select Yes or No as applicable. On the next page provide your details such as First and Last Name, Address, Phone number, Date of birth, Gender, Tax residence, etc.  In this step, you will have to provide as well your ID, employment status, source of wealth, and security questions. 

A confirmation code will be sent to your mobile after completing all the required fields to verify the accuracy of your phone number. On the next page, you will be asked to provide information on the account type – margin or cash. Provide your Annual Income, Wealth, and Liquid Worth as well as your investment objectives, products you want to invest in and the investment experience you have.

The next step is to confirm your tax residence, check the details and provide the necessary information then you need to sign and continue to the next step.  The final steps are to review the information you have provided and sign the online agreements.

Step 2: Upload ID

IBKR will review the application and you will have to provide self-verification by selfie, submit a proof of address document, and submit the picture of the ID in the Final Steps to Complete Application.

Step 3: Make a Deposit

Once all of the submitted documents are approved by IBKR you can fund your account by making a bank wire transfer.

Step 4: Search for BRC Inc

Once your account is active and funded you can log in to your account and select the search field and search for BRCC or BRC Inc.

Step 5: Buy BRC Inc

Once you found the stock on the right-hand side you will see Buy and Sell buttons, click the Buy and a menu will show up to select the quantity and the limit price order. Once ready click Submit Buy Order.

Conclusion

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.

FAQ

  1. Why is BRC Inc. still losing money?

    In the third quarter 2022 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 2022 results, however, the forecast is to see positive profitability at least from EBIDTA's point of view.

  2. Why is BRC Inc.'s stock price at such a low level?

    BRC Inc. went public with a merger with SilverBox in February 2022 which caused some volatility in the stock price in the first half of 2022. Afterward, the negative earnings of the company were the main reason for the low stock price levels.

  3. 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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