Retail Partnerships With Sportsman's Warehouse Will Boost Future Market Reach

Key Takeaways

• Retail expansion and strategic partnerships are set to enhance sales and revenue through improved conversion rates and direct-to-consumer approaches.
  
• New product introductions and expanded marketing will bolster brand awareness and drive revenue growth, while onshore ammo production improves margins and reduces risks.
  
• Increased reliance on celebrity endorsements and higher operating expenses may pressure revenue and margins, while international tariffs and seasonal sales pose additional risks.

Catalysts

A less-lethal self-defense technology company, develops, manufactures, and sells less-lethal personal security solutions in the United States, South Africa, Europe, South America, Asia, and Canada.

• Byrna's expansion into retail through both its own stores and partnerships like the store-within-a-store model with Sportsman's Warehouse is expected to increase direct-to-consumer revenue and significantly boost overall sales due to higher conversion rates in physical locations.
  
• The introduction of new products, such as the compact launcher, is anticipated to improve gross margins and drive revenue growth by attracting consumers interested in concealable non-lethal self-defense options.
  
• Continued expansion of marketing efforts, including broader acceptance of advertisements on mainstream platforms and partnerships with influencers like Megyn Kelly and Lara Trump, should elevate brand awareness and drive increased sales, positively impacting net revenue.
  
• The shift to onshore production of ammunition as part of a Made in America strategy is expected to enhance margins through cost efficiencies and reduced supply chain risks, potentially improving earnings.
  
• Strategic international growth, particularly through increasing sales in markets like Canada and partnerships with entities such as the USCCA, is likely to drive revenue growth and expand Byrna's customer base beyond domestic markets.

Byrna Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Byrna Technologies's revenue will grow by 28.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 14.9% today to 10.9% in 3 years time.
• Analysts expect earnings to reach $19.8 million (and earnings per share of $0.77) by about March 2028, up from $12.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $23.4 million in earnings, and the most bearish expecting $16.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 47.8x on those 2028 earnings, up from 32.2x today. This future PE is greater than the current PE for the CA Aerospace & Defense industry at 32.2x.
• Analysts expect the number of shares outstanding to decline by 0.39% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.41%, as per the Simply Wall St company report.

Byrna Technologies Future Earnings Per Share Growth

Risks

• The reliance on celebrity endorsements for driving sales could pose a risk if the partnerships do not generate the expected return on advertising spend, which would impact revenue and marketing expenses if adjustments are required.
  
• Operating expenses have increased by 47% year-over-year, driven by higher marketing spend, increased payroll, and scaling costs, which may continue to pressure net margins if not managed effectively.
  
• The expansion into new physical retail stores and store-within-a-store models involves ongoing costs and delays to profitability, potentially impacting short-term earnings and requiring sustained revenue growth to justify these investments.
  
• Tariffs and potential trade disputes affecting countries like China, Canada, and Mexico, though currently minimal, could still pose long-term risks if retaliatory measures impact international sales growth, particularly in Canada and Mexico.
  
• The seasonal nature of sales, with a traditional slowdown in consumer spending in the first quarter, may lead to fluctuations in revenue and impact on steady earnings growth projections.

Valuation

• The analysts have a consensus price target of $35.625 for Byrna Technologies based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $181.9 million, earnings will come to $19.8 million, and it would be trading on a PE ratio of 47.8x, assuming you use a discount rate of 6.4%.
• Given the current share price of $18.19, the analyst price target of $35.62 is 48.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.