AMMO, Inc.'s (NasdaqGS: POWW) 126% year-to-date increase* could be the result of a massive increase in institutional and insider ownership. Recently published information shows that at least 91 institutional owners and insiders filed 13D/G or 13F forms with the SEC disclosing ownership in AMMO. The even better news is that of the roughly 89.5 million shares outstanding, the combination of institutional (≈24%) and insider ownership puts the ownership at over 50% of the company. Better still, with AMMO getting included in the Russell 2000 and Russell Microcap indexes on June 25th, expect those levels to move higher. (share price of $7.60 on 6/14/21, 12:06pm est)
For retail investors, having those shares in tight hands could help fuel what is an already impressive June rally and add to the more than 11% month-to-date gain. And not only is the trend a friend, but the list of AMMO stock owners is also impressive.
Notably, several of the largest institutional holders are well-known Wall Street names, including Hood River Capital Management LLC, Zeke Capital Advisors, Llc., Vanguard Group Inc, BlackRock Inc., and Susquehanna International Group, Llp. Their interest is timely, especially after AMMO closed on what is referred to as a transformative acquisition of GunBroker.com for $240 million last month.
The interest and subsequent rise in value could also show that the window of opportunity at current price levels is starting to close. In fact, since our initial coverage of AMMO on May 20th, shares are higher by more than 21%. Moreover, with the Russell index releasing its preliminary list of index inclusions last week, the trajectory for AMMO appears to be decidedly higher.
And rightfully so.
Video Link: https://www.youtube.com/embed/GPileCz5ZiI
Momentum On its Side
In fact, AMMO, Inc. appears to be moving through its Q2 in its best operating position ever. Indeed, its $240 acquisition of GunBroker.com added immediate firepower to its portfolio, boosting an already strong online consumer audience by millions. Keep in mind, too, AMMO was doing very well pre-acquisition. In fact, they blew away Q1 earnings estimates with plenty of room to spare.
A Q1 update in late May exposed that AMMO is indeed in hyper-growth mode. The company blew past its initial guidance by posting $41 million in quarterly revenues - a 51% increase from its $27 million projection. That surge led to an even bigger milestone, with AMMO announcing its first profitable quarter in history. Investors were also inspired by optimistic guidance for the second quarter and back half of 2021.
Thus, the bullish sentiment from both retail and institutional investors appears to be well rooted, especially with AMMO well-positioned and capitalized to maximize its opportunities in the munitions sector.
Moreover, deals made and steps taken during the past few quarters should begin to help accelerate growth.
Massive Online And Physical Presence In 1600+ Locations
Keep in mind that while AMMO is getting included in the Russell 2000 and Microcap index, they look more like a large-cap from an operational perspective. The company already supplies over 750 million rounds per year, has a presence in more than 1600 retail locations, and works from a recently upgraded production facility that can triple current output. Better still, its upgraded manufacturing capabilities are supported by a robust multi-channel distribution network to handle the surging demand from various markets, including law enforcement, military, and sports markets.
And while reports show the combined market opportunity at roughly $32 billion, 2021 is expected to be even higher, with reports indicating a sharp rise in gun permit applications and background checks. Year-to-date, that interest has resulted in a near 20% increase in gun sales, with expectations for that buying trend to continue.
In fact, AMMO is already benefiting from the surge, noting that its ammunition backlog increased by 125% in less than six months. To further maximize its outreach, AMMO opened a call center that ultimately connected them with more than 67,000 dealers, added over 1,000 new customers, and processed over $80 million in booked orders. Better still, as noted, the company's strategy of serving its customers direct has also earned its positions in over 1,600 retail locations, including Rural King, DICK'S Sporting Goods (NYSE: DKS), and Cascade Farm and Outdoor.
The best part is that AMMO can meet an enormous increase in demand from its enhanced 160,000 square foot production facility. That means that AMMO can do more than target demand; they can fill orders.
Remember, too, experience counts.
AMMO Is Growing With Intention
For new investors, it's important to realize that AMMO is no new kid on the block in the sector. In fact, since 1999, their unwavering commitment to excellence and their willingness to capitalize upon strategic expansion opportunities has helped them grow into one of the top five suppliers in the world.
Moreover, even during the unprecedented pandemic-related slowdown, AMMO proved it could grow despite logistical hurdles. During the past 18 months, AMMO expanded its ammunition portfolio, increased production capacity through facility upgrades, and closed its massive $240 million acquisition of GunBroker.com. Those efforts are expected to provide a strong tailwind of revenue-generating momentum heading into the back half of 2021 as global markets return to a more normalized pace of commerce.
In fact, with GunBroker.com revenues included, AMMO is expecting to generate roughly $190 million in revenues for its FY2021. However, some investors speculate that post-acquisition revenues could reach as high as $210 million by the end of the year. Of course, with AMMO getting a full year of GunBroker.com revenues next year, 2022 revenues could surge beyond that level.
Still, 2021 is shaping up to be a record year.
Bullish Momentum Fuels Back Half Of 2021
Perhaps the best news for shareholders is that AMMO's growth is expected to gain momentum. Beyond tangible assets and market-leading brands, they have a management team that performs at an extremely high level. Thus, while 2021 could post record revenues, don't expect growth to slow down next year.
In fact, a deal finalized last month could be an accelerator for near and long-term market expansion. In May, AMMO announced a seven-figure high-margin international ammunition transaction. That deal alone is expected to contribute substantial revenues, and it also creates an opportunity for seamless international business expansion, especially as the global markets ease COVID-related restrictions. Thus, AMMO's current estimate for $30 million in expected revenues from international operations may prove conservative.
Hence, with AMMO firing on all cylinders, current prices, despite the June surge, may still materially undervalue its revenues and assets. Still, market disconnects create opportunities for investors. And AMMO's current share price, especially with its Russell inclusion imminent, may be presenting a massive one.
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