Is BarkBox Stock a Good Investment?

Is Barkbox A Good Investment? Bark Inc (NYSE:BARK) is a dog supply company known primarily for its monthly subscription service BarkBox. The company went public through a June 2021 SPAC merger with Northern Star Acquisition, and its stock has been on a downhill slide ever since.

Now that it is trading in penny stock territory (technically under $5 per share these days is considered penny stock), is BarkBox stock a buy?

Pet box consumers spent an average of $30 per month on subscription boxes in 2020, and Americans spent an estimated $103.6 billion on their pets. Some industry analysts believe the pet market size could reach $275 billion by 2030. This opportunity is big, but BarkBox is in a relatively small niche in that sector.

Bark, Inc has plenty of growth potential, and the subscription box isn’t the only product it offers. The company has every opportunity to sustainably increase revenues over the next decade.

Will Bark be a treat for investors or play dead for their portfolios?

Bark Has A Suite of Doggy Services: Online + Offline

BarkBox was founded in December 2011, and raised over $20 million in funding over the next five years. It used that money to expand its product and service offerings from its initial dog-themed subscription box. Each box has several themed toys, treats, and a chew based on your dog’s profile. While subscriptions are the bulk of the revenue, it offers plenty more, including:

  • BarkCam is a dog-themed Instagram-like service,
  • BarkBuddy describes itself as “Tinder for dogs,” and
  • BarkPost is a dog-themed blog filled with all sorts of dog-related news.

Under the Bark Inc umbrella the company also has Bark Eats (DoorDash for dogs), Bark Bright (dog wellness products), and Bark Essentials (dog accessories).

Besides its boxes, the company has distribution channels through major retailers, including Target (NYSE:TGT) and (NASDAQ:AMZN).

Although it does sell in stores, Bark’s biggest revenue stream is still Direct-to-Consumer, which generates the lion’s share of its revenues. This comes with high shipping costs, but it controls overhead by developing its own products, whereas many subscription services rely heavily on partners to contribute samples in exchange for promotion.

The company has a data-driven approach that lets it mine its active subscriber base of 2.1 million people to drive product design and distribution. Although it could expand to other pets, it currently serves only dogs for now, which could be a winning formula to tackle the biggest market while keeping margins in check.

Barkbox But For Cats… Will Bark Expand?

We love our pets, and dogs are the clear leaders in our hearts. According to the APPA National Pet Owners Survey, 69 million Americans own a dog, more than the next two most popular combined (cats at 45.3 million and freshwater fish at 11.8 million). And this trend extends across generations, with everybody from Gen Z through Boomers all owning them.

Of course, cat owners shouldn’t be ignored, as Bark could extend its customer base to over 100 million people. However, there’s a good financial reason for Bark to focus on dogs – we spend more on them compared to cats in every category, from food to toys, grooming, boarding, and veterinary visits.

Even though dogs are more popular in the USA, there are 91 countries where cats are more popular (versus 76 countries that prefer dogs). Within the U.S., there are 12 states that prefer cats over dogs. This is based on research into how often people post Instagram photos of their pets using cat- and dog-related hashtags.

While not a perfect scientific method, it highlights that BarkBox could grow its market opportunity and revenues by expanding to serve other pets beyond dogs. 

Is BarkBox Profitable?

BarkBox reported gross profit of $139.6 million in the first half of its fiscal year 2022, a nearly 50 percent increase from its haul of $98.4 million in the same period of the prior year.

Direct-to-Consumer accounted for $128.8 million of Bark’s gross profit (up from $89.3 million the prior year’s period). By comparison, its commerce business grossed $10.8 million, a much lower increase from $9.1 million in the first half of the 2021 fiscal year.

Unfortunately, a net loss for the period of -$18.3 million is a far cry from the prior year’s $638,000 profit. This is largely driven by higher shipping expenses that ballooned from $39.3 million to $68.2 million in the second quarter alone, a big problem for a company that relies so heavily on its mail-order business.

The company also attributes this loss to 2022 being a deliberate investment year, in which it strategically invested in Bark Eats and its fulfillment assets. That caused the company to lower its full-year guidance down to a $40 million loss on EBITDA, initially pegged at $31 million. It brings to mind risks facing this stock.

Large TAM Offers Optimism

Freight shipping costs are rising, and this is hitting Bark’s primary direct-to-consumer revenue stream.

The company’s paid user base is relatively small compared to the overall market of dog owners, which means the market opportunity and TAM remains large.

On the balance sheet, Bark holds approximately $272.6 million in the bank, which far outweighs its outstanding debt load of $71.7 million. Is has sufficient runway to make whatever investments it needs to grow within its existing vertical or expand to other animal verticals.

Will Bark Stock Go Up?

Bark stock is down by over two thirds from its pre-SPAC merger price. This has early investors wondering if now is the time to roll over and play dead. But there are plenty of reasons to believe the company could pull itself out of the gutter. The company has invested heavily on strategic initiatives that caused the company to lower its full-year guidance but should also result in longer term growth.

If these investments pay off, the company could have a big growth streak ahead. And it has enough money in its coffers to weather any potential storms over the next few years. Now may be the time to sit up and take notice of this potential value play.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.