Barkbox is going public in a SPAC deal with Northern Star Acquisition (STIC) valuing it at $1.6 billion. The transaction is about to close. What's Barkbox's stock forecast after the STIC SPAC merger? Is the stock a good buy now?
After the transaction closes, STIC shareholders and founders will own 15.8 percent of Barkbox, and PIPE investors will own 9.9 percent. The merged company’s stock will list on the NYSE under the ticker symbol “BARK”.
The STIC-Barkbox merger date
STIC and Barkbox announced their merger agreement on Dec. 17, 2020. Both companies' boards of directors have unanimously approved the transaction. However, STIC shareholders still need to support it through a vote.
The STIC SPAC plans to hold a shareholder vote on the merger on May 28. If shareholders give their approval, the transaction will close almost immediately, and Barkbox stock will trade on the NYSE.
Barkbox’s stock forecast after the STIC merger
Barkbox’s stock forecast after the STIC merger date looks promising. The company’s total addressable market in the U.S. is significant. In 2020, the U.S. pet care industry served 72 million households and was worth $97 billion. The American Pet Products Association estimates that in 2021, around $110 billion will be spent on pets in the U.S.
Barkbox stock is expected to rise after the STIC merger date
Barkbox stock is set to rise after the transaction closes, thanks to the company's robust growth outlook. The dog products and services company offers a gross margin of nearly 60 percent and anticipates to double its sales between fiscal 2021 and 2023.
Barkbox generated revenue of $378.6 million in fiscal 2021 (ended Mar. 31, 2021). The company expects its revenue to rise 36.2 percent year-over-year to $515.8 million in fiscal 2022. Between 2020 and 2022, Barkbox expects its revenue to grow 39.2 percent compounded annually.
STIC stock looks like a good buy now
STIC stock looks like a buy based on Barkbox's growth outlook and attractive valuation. At almost 49 percent below its 52-week high, the stock offers investors exposure to Barkbox at a bargain. Barkbox is a well-funded business. The company will receive $454 million in gross cash proceeds from the SPAC deal, which includes $200 million in PIPE (private investment in public equity). At $9.98, public investors have an opportunity to invest alongside PIPE investors, including Senator Investment Group and Fidelity.
Barkbox versus Chewy
Barkbox is a dog care subscription service that offers toys, food, among other products. The company had 1.8 million active subscriptions as of Mar. 2021, and has a 95 percent retention rate. STIC valued Barkbox at a pro forma enterprise value of $1.6 billion. Based on this enterprise value and Barkbox’s projected total revenue, its valuation multiples for fiscal 2022 and 2023 are 3.1x and 2.3x, respectively.
Meanwhile, online pet retailer Chewy went public in 2019 at $22. The stock is currently 208 percent above its IPO price. The company is expected to report sales of $8.9 billion in fiscal 2021 (ended Jan. 31, 2022) and $10.8 billion in fiscal 2022. In fiscal 2020, Chewy reported sales of $7.15 billion, and a gross margin of about 25.5 percent. Chewy is currently trading at a next-12-month EV-to-sales multiple of 3.2x.