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SBEA Stock is just another SPAC that looks doomed to disappoint


SilverBox Committed Fusion I (NASDAQ:SBEA) the share represents a SPAC (Société Spéciale d’Acquisition) which has raised $ 300 million in February and has a goal.

Source: Dmitry Demidovich / ShutterStock.com

My Investor place colleague David Moadel called Black gun coffee the “Starbucks of the Right” recently. The coffee company is aimed at veterans and first responders.

Moadel believes Black Rifle Coffee is a value to bet on. I don’t see it that way.

Don’t hesitate to buy their coffee if you’re a veteran, but I wouldn’t buy the stock, before or after PSPC. Here’s why.

SBEA stock is not the best buy

When the two companies announced the merger on November 2, SBEA stock jumped 15% on the news. He has since returned a large chunk of those gains. It is trading slightly above $ 13 as of this writing.

So, if you bought three SilverBox Engaged units during the February IPO, you have three SBEA shares plus a whole mandate buy another stock for $ 11.50. If you were forced to exercise the tenure you would be sitting with a 38 cent loss on your $ 40.50 investment [3 times $10 plus $11.50 less 4 times $10.28 (current price)].

It’s been over 10 months. If you purchased $ 40.50 from SPDR S&P 500 ETF Trust (NYSEARCA:TO SPY) in February instead of SBEA you would have $ 50.84, $ 10.72 more.

Okay, enough with the math. The point is, every dollar you put into a stock that doesn’t work in this market – we are near the close of records – is a missed opportunity.

Coffee stocks in 2021

Society

Cumulative performance over the year

(Until November 17)

Starbucks (NASDAQ:SBUX) 9.24%
International restaurant brands (NYSE:QSR) -2.56%
Dutch brothers (NYSE:BROS) 60.74%
Mcdonalds (NYSE:MCD) 20.15%

As you can see in the table above, the performance of coffee stocks has been all over the map in 2021. Now with the explosion in coffee prices, it will be more difficult for these companies to pass on costs. ‘higher inputs.

But if anyone has pricing power, it’s SBUX. As for Black Rifle coffee, it may appeal to an attractive niche market, but veterans have to foot the bills like the rest of us. Budget decisions could lead to fewer visits to the local location.

And, at the end of the day, investing is making money. A bet on Starbucks in the past 10 years would have generated an annualized total return of 19%, despite its recent woes. As the saying goes: “He will rise again!”

For me, a bet on Starbucks is the smartest game.

Black Rifle finances

As the management team of SilverBox Engaged Merger I told its investors on November 2, it would merge with “fundamentally strong companies with strong growth trajectories.”

“BRCC is a native digital omnichannel company serving loyal customers in a massive addressable market. With projected revenues of over $ 230 million in 2021 and $ 311 million in 2022, we believe DCFC already has the right foundations for sustainable growth, ”the November 2 press release said.

So, assuming it hits $ 230 million in sales in 2021, the 40% gross margin he boasts [pg. 51 of its November 2021 presentation], suggests that its marketing and SG&A (sales, general and administrative) spend will be quite high over the next two years, as it doesn’t expect to be profitable until 2023.

At this point, he expects to have gross margins of 43.5% and an operating margin of 0.6%. Starbucks’ operating margin is currently 14.3%, about its five-year average.

It is not always the gross margin that matters most, because Dutch Bros. proven 30.4% with a 3.1% operating margin – but how you control operating expenses as you grow your business.

To the P. 43 of his presentation, he argues that his enterprise value of 5.5 times his estimated turnover in 2022 is relatively low compared to Dutch Bros et al. May be.

But when you can buy Lululemon (NASDAQ:LULU) to a multiple of 8.7x 2022 estimates, I don’t think there is any question you should decide on.

Black Rifle Coffee may be the “Starbucks of the Right,” but it’s not the stock to buy. It’s not even the best stock of coffee to buy.

If you are a veteran, buy the coffee and hand over its stock.

As of the publication date, Will Ashworth does not have (directly or indirectly) any position in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publication guidelines.

Will Ashworth has been writing about investing full time since 2008. His publications include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and several others in the United States and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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