AMMO Inc. (NASDAQ: POWW) shares are consolidating after a 15% run in June and a more than 137% YTD. The jump in price came after robust operating performance, surging revenues, and guidance that calls for its best quarter in history.
Better still, AMMO's own guidance gives investors every right to be bullish. In fact, AMMO's optimism is fueled by momentum from its year-end report that posted a 409% increase in comparative revenues, increased gross profit margins by 179%, cut operating expenses as a percentage of sales by 58%, and posted a 296% increase in EBITDA to $4.8 million over the same period last year. Better yet, AMMO delivered an adjusted EPS of $0.04, a more than 167% increase over last year. By the way, its year-over-year increases are equally impressive. And if that wasn't enough to inspire interest, AMMO raised its current FYQ1 guidance to $44 million.
The story gets even better, with AMMO expecting to report its first positive net income quarter. Moreover, AMMO added to its bullish commentary, pointing toward expectations to post a 354% year-over-year revenue increase that includes its raised guidance to deliver $44 million in revenue for its FYQ1. Also, revenues should be positively impacted from a consolidation in its manufacturing operations in Wisconsin that is expected to increase already strong margins.
The more excellent news is that AMMO's guidance follows an extraordinary period of growth during FY 2021.
Video Link: https://www.youtube.com/embed/GPileCz5ZiI
Momentum Into FY2022
The best news is that AMMO is experiencing growth throughout its business, contributing to a 300% increase in sales to $62.5 million, a 173% increase in gross profit margins, EBITDA of $8.1 million, and an adjusted EPS increase to $0.07, a 150% jump over 2020 totals. Moving forward, AMMO is locked and loaded for growth.
In fact, its triple-digit percentage gains didn't get the full impact of its $240 million transformative acquisition of Gunbroker.com. Revenues from that deal are expected to push revenues up to $190 million this year. Those numbers put its June 30th $10.37 share price back in the crosshairs. Deservedly so.
Moreover, its acquisition of Gunbroker.com arguably puts AMMO in its best operating position ever. Indeed, they showed a glimpse of that by reporting its best quarterly performance in company history. Still, as noted, they expect those numbers to get even better.
That's because AMMO is targeting near-unprecedented US demand for ammunition, showing no signs of slowing down. Moreover, its new state-of-the-art facility, expected to be fully operational in about a year, will add resources that enable AMMO to fuel revenue-generating opportunities. Already, AMMO plans to maximize the potential from its upgraded facility through cutting-edge design and its announced contract to design and manufacture technologically advanced ballistic match ammunition for the US Department of Defense. Moreover, they expect to capitalize on substantial opportunities to expand Gunbroker.com's revenue contributions.
In fact, those opportunities can be massive, noting that despite Gunbroker's 6 million active users, ammunition sales account for only about 3% of its revenues. Thus, with ammunition being AMMO's specialty and expertise, an opportunity for potentially exponential growth is created through that asset alone. And the company expects to seize that opportunity by marketing directly to that massive consumer audience.
Still, there's much more to like going forward. And the consolidation at the $8.16 level may be presenting a compelling investment opportunity.
Bullish Sentiment For AMMO, Inc
In fact, its blowout FYQ4 and YTD results aren't all Gunbroker. AMMO is already a substantial player in the sector. This year, AMMO expects to deliver over 750 million rounds of ammunition to a diverse list of customers. And keeping in mind that the massive Gunbroker.com active user base is wide open to accelerate ammunition sales, its position should get even stronger.
Better still, AMMO anticipates having products available in more than 1600 retail locations, with its soon completed manufacturing facility expected to triple its production capacity. That's excellent news, especially noting that its multi-channel distribution network directly targets a more than $32 billion market from law enforcement, military, and sports markets.
Moreover, investors can't undervalue the potential created by the surge in gun permit applications and background checks through June, which analysts expect to continue into the back half of the year. In fact, with political debate ongoing, that trend could accelerate. Already, surging demand has caused sold-out store shelves and order backlogs for AMMO
In a previous update, AMMO noted that its ammunition backlog increased by 125% in less than six months. And while that's an impressive stat, keep in mind that this year AMMO will benefit from marketing initiatives that connected them with more than 67,000 dealers, added over 1,000 new customers, and processed over $80 million in booked orders last year.
Better still, the company expects to generate substantial new revenues from its direct sales in roughly 1,600 retail placement locations, including DICK'S Sporting Goods (NYSE: DKS) and Cascade Farm and Outdoor.
An Opportunity In-Play
Thus, while its 409% revenue increase last year is impressive, the company is set up to crush those numbers in the future. In fact, guidance to reach $190 million in sales substantiates that point. Thus its share price consolidation may be an opportunity for those that missed the first leg of its run higher.
Better still, with AMMO having a history of beating expectations and now even raising guidance, the value opportunity, even at recent highs, is compelling.
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