American Rebel Holdings (NASDAQ: AREB) shares have rocketed higher in premarket trading the day after the stock joined the NASDAQ index from the OTCQB. The company’s stock dropped by just over 25% on Monday but has shot up by almost 50% in premarket trading.
So, is this company worth your time?
What is American Rebel Holdings?
AREB is a Nashville-based designer of containers for firearms. These containers vary from gun safes to specially produced concealed carry equipment and bags, most of which are made at AREB’s manufacturing facility in Chanute, Kansas.
Additionally, the company also sells apparel and accessories.
The company claims to have positioned itself as “America’s Patriotic Brand”. It also warns visitors to its website:
“There’s a growing need to know how to protect yourself, your family, your neighbors or even a room full of total strangers.”
How Does AREB Make Money?
AREB promotes and sells its products through a growing network of dealers. Its products are available from select regional retailers and local specialty safe, sporting goods, hunting and firearms stores.
Additionally, gun lovers can find the products online on American Rebel Holdings’ website and e-commerce platforms such as Amazon.com.
Though gun storage is the primary use for the company’s safes, AREB has also worked with other businesses to provide secure storage. These include cannabis dispensaries, which require secure places to store inventory.
The company’s safes have traditionally brought it the largest share of its sales, but it is branching out into new product lines. These include the ‘Youth Protection Backpack’, which incorporates a ballistic shield and is designed to keep youngsters safe from school shooter situations.
Finally, American Rebel Holdings anticipates a further possible revenue stream emerging in the future. AREB’s management believes the company brand could have significant licensing value for third parties, which could pay to emblazon their own products with the American Rebel name.
Even so, no revenues have yet been generated from a licensing deal.
AREB’s Competitors
The gun safe market is dominated by a small number of companies such as Superior Safe and Champion Safe. This duo have similar branding to American Rebel, but AREB is confident that they stand out less to the consumer.
Going Nuts for Guns
Demand for firearms, and therefore gun-related accessories, has shot up in recent years. One indicator of this comes in the form of background checks, which are typically needed with a firearms purchase.
In 2020 there were a record 39,695,315 background checks, with 2021 lagging just behind with 38,876,673. These years were both major steps up from the previous record, which was 2019’s 28,369,750. However, the slight drop in 2021 could indicate the enormous jump in gun sales seen in 2020 might have sated gun lovers’ hunger for the near future.
However, the company itself has noted how current affairs have had a huge hand in the soaring gun sales numbers. Following the 6 January 2021 storming of the US Capitol Building by far-right agitators, AREB said sales had reached unprecedented levels.
While gun sales don’t necessarily translate to weapons safe and accessory sales, they are anticipated to increase demand for AREB’s products. A further source of sales stimulus are new gun storage regulations which look set to be passed in populous states like Massachusetts, California and New York.
AREB Financial Overview and Metrics
EPS: -$0.10
P/S: 4.77
Market cap: $282.4m
The company’s last full year, which was the 12 months ended 31 December 2020, saw it make a net loss of around $6.0m, down from $7.6m the year before. That year also saw revenue more than double to $1.3m.
However, the nine-month period ended 30 September indicate a slowdown in sales, with revenue coming in at $0.85m, down from $0.90m in the same period the year before. This appears to correlate with the slight downturn in gun sales between 2020 and 2021.
Is AREB a Good Investment?
Aside from financial considerations, there is also a bit of an elephant in the room when considering AREB. I’m not going to tell anyone what to think, but it is worth considering the company’s position on firearms and its politically charged messaging before deciding whether or not to invest.
Moral quandaries aside, there are some factors which show the stock to be a mixed bag. For one thing, the high P/S ratio indicates that, based on current numbers, the stock isn’t great value for money in terms of its financial performance.
What’s more, while gun sales have been very high for the last couple of years, it stands to reason that we could see sales fall back a little further in 2022. It’s not like guns are commonly ‘used up’ or broken, so consumers are probably unlikely to feel like they need many more in the near future.
However, new legislation for safe storage of firearms in some parts of the US could still lead to a boom in sales of the company’s safes.
This is unpredictable though, as we have already seen that unprecedented events like the storming of the Capitol Building can send sales skyrocketing. If that happens, American Rebel Holdings could see sales jump once again.