| The Untapped Value at AMMO, Inc. (POWW) Should Be Multiples of What it is Now
Good day everyone and welcome to our new trading group members,
AMMO, Inc. (NASDAQ: POWW) is the owner of Gunbroker.com, the largest online marketplace serving the firearms and shooting sports industries, and a producer of high-performance ammunition and components.
Current price $3.09/share (at market close 10-20-22)
POWW shares traded as high as $3.22/share in the Thursday session, closing the day up marginally. The company shares followed the overall equities market that was green in the morning but turned red in the afternoon. There were 920K shares traded.
POWW does not sell guns. They sell ammunition and lots of it in both commodity versions and their own proprietary versions. They operate Gunbroker.com, a platform, which is not unlike eBay, for gun enthusiasts to auction and sell guns and related products. They conduct their business with strict adherence to the law, and this year donated one million rounds of ammo to the Ukraine Ministry of Defense.
The two financial metrics that convince me POWW is oversold are their guidance for FYE 2023 (March 31, 2023) of revenues of $305M and EBITDA of $105M. Both figures suggest a higher potential value. I’m also looking toward the future when production from the new Wisconsin facility, just opened last month, is fully operational and could add $80M to revenues.
I’m also considering the additions to the top and bottom lines at POWW as they replace third party operators offering e-commerce payments and marketing data & analytics at Gunbroker.com, with their own operations. The e-commerce segment alone could add $5M to net profits.
Both the revenue and EBITBA figures, based upon easily looked up average multiples for both the S&P 500 and the NASDAQ exchange, suggest that the current market value of $360M may be inadequate and there could be justification for a significantly higher level. I would further suggest that since POWW is growing, both at the top and bottom ends, that the higher range of those valuation ratios should apply.
I must point out again that on August 16th, Lake Street Capital updated their coverage of POWW with a target price of $9.00/share placing a $1B value on the company.
I can’t discount the potential for an exit at POWW either. Look at the ammunition for sale at your local ammo retailer or online. The biggest names you see are Remington, Winchester, Federal, and Browning. Those brands, once independent companies like POWW, have been bought by multi-billion-dollar conglomerates.
Earlier I talked about the company’s new manufacturing facility in Wisconsin and thought you might want to see a drone tour of the plant. The drone footage is from July, before the plant was opened and the photos below show an operational building. It is massive.
Regarding the capacity of the new POWW plant in Manitowoc, Wisconsin, Fred W. Wagenhals, CEO said, “we will go from 350 million to close to a billion rounds, blended mix, we hope to average $.40 to $.45 per round.”
Mr. Wagenhals also spoke his perspective on the ammo market “Continued growth is how we see the industry, last year 5.6 million new shooters were added in the US. Continued conflicts around the world will keep demand high. Also, Biden has banned all Russian ammo imports.”
POWW is a strong company that is experiencing tremendous growth and operating in an expanding market sector. They are growing both revenues and profits while expanding their operations. POWW is the type of company that investors should flock to.
The Traders News Group
original report below
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AMMO, Inc. (POWW) Just finished construction of a new state-of-the-art ammunition manufacturing facility, that they expect, could triple their current ammo producing capacity.
AMMO, Inc. Planned Launch of Proprietary eCommerce Payment Processing
- Internal Management & Control of Payment Processing to Enhance Buyer/Seller Marketplace Experience
- Planned Separation from 3rd Party Processor BitRail Projected to Drive an Additional $5 million to the Bottom Line in First Full Year of Operation
Good day everyone,
AMMO, Inc. (NASDAQ: POWW) is the owner of Gunbroker.com, the largest online marketplace serving the firearms and shooting sports industries, and a producer of high-performance ammunition and components.
Current price $3.08/share (at 2:00PM EDT 10/19/22)
I want to talk about POWW because it’s a rapidly growing company that is trading below its book value ($3.23/share) and the current market cap is close to guided FYE 2023 revenues of $305M. After a great summer for the company, peaking at $6.05/share in mid-August, POWW has dropped nearly 50% and it is now starting to bounce, creating a “buy the dip” opportunity.
Look at the YoY growth at POWW (FYE is March 31st)
2019 $4.1M
2020 $14.7M
2021 $62.4M
2022 $240M
2023 $305M (guidance issued by the company)
In Q1 (ended 6-30-22) of the company’s FYE 2023 they reported $3.2M in net income.
8/16/2022 Lake Street Capital Target $9.00
POWW operates in two distinct business segments:
Ammo, Inc. engages in the design, production, and marketing of ammunition and ammunition component products serving markets, including law enforcement, military, sports shooting, and self-defense. The company’s products include STREAK Visual Ammunition that enables shooters to see the path of the bullets fired by them; and StelTH Subsonic ammunition primarily for suppressed firearms. AMMO, Inc. was established in 2016 and started trading on the NASDAQ exchange in December 2020. This segment is expected to account for 77% of FTE 2023 revenues.
Gunbroker.com was acquired by POWW in June of 2021. It’s the largest online marketplace dedicated to firearms, hunting, shooting and related outdoor products with over six million registered members. GunBroker.com, is an auction site that supports the lawful sale of firearms, ammunition, and hunting/shooting accessories. The company generates revenues by charging a fee on every transaction conducted through the site. This segment is expected to account for 23% of FYE 2023 revenues.
There are new developments at POWW as the company is making moves to increase revenues.
POWW has just announced two new business segments, a proprietary eCommerce payment processing platform and an in-house marketing suite of services. Both service-related segments are designed to facilitate transactions on Gunbroker.com.
These new marketing services are designed for well-established and industry leading manufacturers and large footprint Marketplace sellers wanting to take advantage of the consumer reach of the GunBroker.com platform. Data analytics will better ensure buyers are able to shop for and purchase guns, ammunition, and outdoor sports products they are interested in based upon regional and national sales data and trends.
The GunBroker.com proprietary ecommerce payment processing suite will allow the company to control all transactional payment processing elements of buying and selling products offered on the GunBroker.com marketplace.
Both services mentioned above are already used on Gunbroker.com but provided by third parties. Those revenues can now come to POWW.
In late September, POWW opened its brand new 185,000 square foot manufacturing facility in Manitowoc, Wisconsin. POWW expects the new state-of-the-art ammunition manufacturing facility could triple their current ammo producing capacity.
In an update last week on the Wisconsin facility, the .50 BMG manufacturing line is now operating product has passed testing and shipped domestically. Also, the company’s market leading armor piercing (“AP”) and armor piercing incendiary (“API”) with technology developed and refined over the past 12-18 months is presently in the process of load development, loading and testing to be ready for legally authorized distribution. The company has estimated their .50 BGM capacity could add $80M to annual revenues.
POWW manufactures and distributes their own branded ammo at virtually all major sporting goods retail outlets. The company also sells their own patented products including the Hard Armor Piercing Incendiary Round (HAPI) for piercing tough targets as well as O.W.L . Technology™ Non-Incendiary Visual Ammunition with Streak technology that gives the shooter (and not the target) a visual trace of the bullets path.
I urge you to follow this link to several videos posted on You Tube by the company.
A Potential Spin-Off:
POWW has proposed to split the company into two publicly traded entities with one company consisting of the manufacturing business and the other company consisting of the online business. The company advises that the splitting of the company should be completed in the calendar year 2023.
When the split of the company is completed, each current shareholder of POWW will own one share of Outdoor Online, Inc., (new name) comprised of GunBroker.com and its related online businesses, and one share of Action Outdoor Sports, Inc., (new name) the Company’s current ammunition and munition components business. The separate entities are expected to have new ticker symbols.
POWW statistics:
FYE March 31st, MRQ June 30, 2022
Outstanding shares 116M
Float 88M
Cash (mrq) $20.9M
Revenues (ttm) $240M
Book value (mrq) $3.23/share
Insider ownership 25%
Institution ownership 32%
In the spring of this year, POWW donated one million rounds of ammunition to support the Ukrainian MOD’s opposition to Russia.
With a new manufacturing facility that could add $80M to revenues and two new start up service segments coming online, POWW should be looking at a significant near-term swing.
Stay tuned for our full report on POWW.
If you love the stock as much as we do, spread the word.
The Traders News Group |
