AMMO Inc. (NASDAQ: POWW) is not following the broad market sell-off. In fact, in sharp contrast, shares traded higher by 5% earlier this week following bullish guidance that has set expectations for its FYQ2 revenues to reach $51 million in sales. Better still, that quarter, ending September 30, 2021, sets the stage for more accelerated growth into the back half of the year, with POWW expecting revenue-generating traction to continue across its entire business platform. In fact, AMMO said it expects to deliver "at least" that much in the quarter, leaving the door open to better-than-expected results. Investors appear to like the terminology.
After all, at $51 million, that represents a year-over-year increase of 400%, attributed in good part to its transformative acquisition of Gunbroker.com, which brings roughly six million registered users into its revenue-generating crosshairs. Still, overall growth isn't just from Gunbroker.com.
In its guidance, the company made clear that its improved outlook reflects strong demand across its entire portfolio of high-performance products taking advantage of its aggressive marketing strategy, expanding capacity, and, yes, its progress on its GunBroker.com integration.
Keep in mind, too, the revised-higher guidance comes after AMMO's already published year-end report 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.
And if that isn't enough to inspire interest, AMMO's FYQ2 results are expected to follow potentially record-setting momentum from its first quarter that ended in June, which is expected to post at least $44 million in sales. Thus, while the sequential Q over Q growth is impressive, the expected 400% YoY increase attracts substantial investor attention as well.
And deservedly so.
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Guidance Follows An Already Extraordinary Period Of Growth
In fact, AMMO's most recent guidance follows an already extraordinary period of growth. Better still, its growth isn't segmented; it's a result of strengthening revenue-generating traction throughout its business that drove a 300% increase in sales to $62.5 million, a 173% increase in gross profit margins, EBITDA of $8.1 million, and a 150% increase to adjusted EPS increase to $0.07 in FY 2020. Even better, AMMO has shown every indication that it's locked and loaded for growth.
In fact, the company, and its investors, are yet to see the full impact from its $240 million transformative acquisition of Gunbroker.com, which is expected to push revenues toward $190 million this year. However, as integration continues, expect those revenues to show a more emphatic presence. Better still, the ammunition and munitions markets are aligned with AMMO's vision to contribute significantly to growth in the near term.
In fact, expect AMMO to benefit from near-unprecedented US demand for ammunition, which is showing no signs of slowing down. In fact, current gun permit applications are soaring to near all-time highs, with political rhetoric driving consumers to the markets. Moreover, AMMO's new state-of-the-art facility, expected to be fully operational in about a year, will enable AMMO to capitalize on multiple revenue-generating opportunities by seizing upon new market opportunities. In fact, the company already said it plans to maximize the potential from its upgraded facility through cutting-edge design and contracts to design and manufacture technologically advanced ballistic match ammunition for the US Department of Defense.
Keep in mind, too, that ammunition sales to Gunbroker.com's roughly six million active users accounted for only about 3% of its revenues. Thus, AMMO can inure from an integrated consumer market and allow them to capitalize on its expertise to deliver potentially exponential growth from that user base alone.
And while Gunbroker.com is helping to send revenues soaring, there's plenty more demand from its other markets. And that makes the current $7.40 a share price a compelling investment opportunity.
Demand From Multiple Big-Ticket Markets
In fact, its blowout FYQ4, triple-digit percentage YoY increase, and expected surge in FYQ1 and FYQ2 aren't all Gunbroker.com related by any means. AMMO had established itself well before that acquisition closed. That deal only made them substantially stronger.
This year, AMMO expects to deliver upwards of 750 million rounds of ammunition to a diverse list of customers. Better yet, that number can be significantly higher as the company targets its Gunbroker.com active user base and retail and wholesale consumers through its broad online and brick-and-mortar product placements.
Already, AMMO expects to drive revenue growth from having products available in more than 1600 retail locations. And with its soon completed manufacturing facility expected to triple its production capacity, its ability to increase its already impressive market presence will grow. In fact, through its multi-channel distribution network, AMMO is effectively targeting a more than $32 billion market from law enforcement, military, and sports markets. The better news is that the revenues they generate from these substantial markets are high-margin contributions.
Keep in mind, too, AMMO will benefit from surging demand causing sold-out store shelves and order backlogs for AMMO. In fact, AMMO already told the markets that its ammunition backlog increased by 125% in less than six months. Better still, from a revenue pipeline perspective, as AMMO fills those orders, expect them to get replenished from marketing and operational 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.
Those efforts add to its revenues expected from its direct sales channels, with roughly 1,600 retail placement locations, including DICK'S Sporting Goods (NYSE: DKS) and Cascade Farm and Outdoor leading that charge.
Hence, weak broader markets may be hitting AMMO shares entirely too hard. In fact, not only is the ammunition sector booming, with the economy strengthening, that trend is likely to accelerate. And it all bodes well for AMMO, Inc.
Don't Let The Weak Markets Disguise Opportunity
Thus, while the weak broader markets may have taken AMMO shares lower in sympathy, expect fundamentals and a compelling growth story to soon win back its appropriate valuation. In fact, its share-price-to- revenues multiple is absurdly low at current levels and is clearly exposing a massive near and long-term investment opportunity. Admittedly, no stock goes straight up. The good news there, however, is that when good stocks are taken lower indiscriminately, value opportunities arise. And AMMO stock is presenting one.
Hence, while its YoY growth is indeed impressive, so is its guidance. And for wise investors that trade with forward-looking bias, AMMO stock may be offering one of the best values in the ammunition sector. And its $190 million in expected year-end sales not only shows that AMMO is already playing in the big leagues but it also enables them to accelerate its initiatives to capitalize on and enhance enormous market opportunities.
Thus, current prices may be offering the second chance that investors hoped for as the stock puts its 52-week high of $10.37 back in its crosshairs, putting a gain of more than 40% in focus.
And with AMMO, Inc. continuing to raise its already bullish guidance to potentially record-setting levels, the return to those highs may come much sooner rather than later, and provide refuge from a disjointed market.
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