AXIL Brands ($AXIL) is well-positioned to capitalize on the increasing popularity of shooting sports, which has seen a surge in participation over the past few years. This analysis suggests that a valuation zone of around $10 per share is a reasonable expectation for the stock as the company leverages broader industry trends and its growing product portfolio.
Growing Popularity of Shooting Sports
The rise in the popularity of shooting sports is a key driver for AXIL Brands. According to various reports, shooting sports, including target shooting, precision rifle competitions, and recreational activities, have seen a resurgence in recent years(Mordor Intelligence).
North America, especially the U.S., remains the largest market for shooting sports. With millions of gun owners, a deeply ingrained culture of firearm ownership, and the rise in competitive shooting events, the demand for shooting-related gear, such as AXIL's hearing protection products, is expected to grow significantly(IMARC)(Grand View Research).
Moreover, the recreational shooting segment has diversified to include younger demographics and women, broadening the addressable market(IMARC). As shooting sports attract a wider audience, companies that provide accessories, including hearing protection and enhancement like AXIL, stand to benefit.
The Covid-19 Gun Sales Boom and Its Lasting Impact
During the early stages of the COVID-19 pandemic, there was a massive surge in gun sales. In 2020 alone, firearm sales in the U.S. increased by more than 40%(Shooting Industry Magazine). This was driven by uncertainty, concerns about personal safety, and heightened interest in self-defense. Importantly, many first-time gun buyers entered the market during this period, expanding the total addressable market (TAM) for firearm-related accessories, including hearing protection devices, which AXIL specializes in.
Although the spike in sales has normalized, the number of new gun owners means the market for shooting sports and related products is now larger than before. As more individuals engage in shooting sports and require appropriate safety equipment, AXIL's revenue is likely to keep growing. The company's significant revenue growth, from $2.34 million in fiscal 2022 to $27.5 million in fiscal 2024(AXIL)(Finviz), suggests that it has effectively capitalized on this expanded market.
AXIL’s Growth and Strategic Initiatives
AXIL Brands has demonstrated significant growth over the past few years. The company posted record fiscal year 2024 results, with a 17% increase in revenue and improved profitability. AXIL's strategic initiatives, including expanding into new retail and distribution channels, forming partnerships with brands like Beretta, and increasing its marketing footprint, have all contributed to its top-line growth.
Moreover, with a gross profit margin of over 73%, AXIL is maintaining healthy operational efficiency while scaling its business. As the company continues to expand its product offerings and tap into new international markets, such as through distribution agreements in Europe, AXIL's earnings growth potential remains robust.
A Reasonable Valuation Zone Around $10
Given AXIL's revenue trajectory, its strong gross margins, and the expanded TAM due to the surge in shooting sports, a valuation zone around $10 per share appears reasonable. This zone is not merely speculative but grounded in the company’s recent financial performance and the growth prospects within its industry.
Industry Comparisons: When compared to other consumer discretionary and shooting-related companies, AXIL’s current revenue multiple suggests it has room to grow into this valuation zone. With a price-to-sales ratio of just 1.23x, AXIL is trading at a discount compared to some of its peers in the broader consumer electronics space (which features a revenue multiple of 2.51x).
Technical Perspective: As of September 2024, the stock trades around $5, with the 200-day moving average at approximately $9.36. The stock could experience a natural rebound towards this valuation zone as the company continues to execute on its growth strategy and expand its presence in the global market.
Conclusion
AXIL Brands is in an advantageous position to capitalize on the expanding market for shooting sports and related accessories. With a growing revenue base, strategic partnerships, and a focus on product innovation, AXIL’s business fundamentals support a reasonable valuation zone of around $10 per share. As the popularity of shooting sports continues to rise, and with AXIL’s aggressive growth trajectory, the company has ample opportunity to realize significant value for its shareholders.
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