Growing Outdoor Participation And E-Commerce Will Drive Premium Markets

Key Takeaways

• Accelerating innovation and premium product demand, coupled with effective e-commerce and subscription strategies, are fueling stronger-than-expected growth, margin expansion, and brand loyalty.
  
• Disciplined M&A and organic category expansion, supported by robust financial flexibility, position the company to outpace market trends and secure long-term earnings stability.
  
• Shifting consumer trends, persistent supply chain and innovation challenges, and high regional reliance heighten risks to revenue, profit, and competitive positioning for American Outdoor Brands.

Catalysts

Provides outdoor products and accessories for rugged outdoor enthusiasts in the United States and internationally.

• Analyst consensus expects new product launches like the BUBBA Smart Fish Scale and ClayCopter to gradually build brand awareness and sales, but this underestimates the pace and impact-nearly 29% of net sales were already from new products this quarter, and strong point-of-sale data across "horse brands" signals a step-change in top-line growth as innovation cycles accelerate.
  
• While analysts broadly agree that recurring and subscription revenue will boost margins, there is likely underappreciation of how exclusive launches like SCORETRACKER LIVE, integrated with hardware and app technology, can rapidly scale high-margin recurring revenue and entrench brand loyalty, translating directly into expanded net margins and resilient earnings growth.
  
• Outdoor recreation participation continues to grow at a faster-than-expected rate, with younger, affluent, and enthusiast consumers increasingly seeking premium, innovative products-this secular shift toward premiumization plays directly to American Outdoor Brands' strengths, supporting above-market revenue growth and improved pricing power.
  
• The e-commerce channel's ongoing evolution is under-analyzed, as the company's retail partners are shifting significant share to their online platforms, allowing American Outdoor Brands to access a broader, higher-margin digital customer base and potentially drive a step-change in both sales velocity and net margins as direct-to-consumer strategies mature.
  
• Management's disciplined approach to opportunistic M&A and organic expansion into adjacent outdoor product categories positions the company for outsized, accretive growth and enhanced earnings stability, leveraging an underleveraged balance sheet and strong free cash flow to quickly capture incremental market share as outdoor participation trends accelerate.

American Outdoor Brands Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on American Outdoor Brands compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming American Outdoor Brands's revenue will grow by 4.2% annually over the next 3 years.
• Even the bullish analysts are not forecasting that American Outdoor Brands will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate American Outdoor Brands's profit margin will increase from -2.2% to the average US Leisure industry of 5.1% in 3 years.
• If American Outdoor Brands's profit margin were to converge on the industry average, you could expect earnings to reach $12.2 million (and earnings per share of $1.02) by about September 2028, up from $-4.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 23.4x on those 2028 earnings, up from -23.2x today. This future PE is lower than the current PE for the US Leisure industry at 24.0x.
• Analysts expect the number of shares outstanding to decline by 1.5% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.87%, as per the Simply Wall St company report.

American Outdoor Brands Future Earnings Per Share Growth

Risks

• The increasing consumer shift toward digital and indoor entertainment, combined with demographic trends showing less interest in traditional outdoor recreation among younger, urban populations, threatens to shrink American Outdoor Brands' addressable market and could result in long-term pressure on revenues.
  
• Heightened tariff volatility and persistent supply chain complexities, including ongoing reliance on China for advanced manufacturing, create structural challenges that are likely to keep input costs elevated and compress profit margins, limiting earnings growth even if short-term margin gains are achieved.
  
• The company's portfolio is heavily weighted toward legacy brands with moderate innovation, and while management highlights new products, inconsistent new product launches and a cautious approach to innovation during market volatility risk falling behind rapidly evolving consumer preferences, potentially leading to stagnant or declining net sales over time.
  
• Intensifying competition from both larger incumbents consolidating the outdoor sector and from digitally native direct-to-consumer brands with greater pricing flexibility and marketing agility increases the risk of market share loss and erodes American Outdoor Brands' traditional distribution and retail advantages, negatively affecting future revenues.
  
• With more than 90% of sales concentrated in North America and international revenues already down over 50% year-over-year, the company remains highly exposed to regional economic downturns, policy shifts, and growing regulatory or societal pressures against firearms and associated activities, which could increase volatility and further depress earnings.

Valuation

• The assumed bullish price target for American Outdoor Brands is $19.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of American Outdoor Brands's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $19.0, and the most bearish reporting a price target of just $14.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $238.4 million, earnings will come to $12.2 million, and it would be trading on a PE ratio of 23.4x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of $8.31, the bullish analyst price target of $19.0 is 56.3% 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.