Brilliant Earth Stock (BRLT) Has a Shining Future After Its IPO

Brilliant Earth is set to go public through a direct listing on Sep. 23. The company ended up pricing its IPO below its previously indicated range, most likely due to choppy market conditions amid a flurry of IPOs. What can investors expect following its IPO, and what's Brilliant Earth (BRLT) stock's 2025 forecast?

Brilliant Earth is a direct-to-consumer jewelry company that ethically sources its gemstones. It was founded in 2005 and targets Millennial and Gen Z consumers.

Brilliant Earth stock is expected to rise after its IPO, as about 2 percent of the company’s Class A shares will be offered to retail investors through Robinhood. Being accessible on Robinhood tends to create more of a buzz for IPOs.

Brilliant Earth filed its IPO documents with the SEC on Sep. 14, and is expected to list on the Nasdaq under the ticker symbol "BRLT". The company initially gave a price range of $14–$16 but priced its shares below that range on Sep. 22, at $12 each. Brilliant Earth will start trading on Sep. 23.

In 2020, Brilliant Earth’s sales grew 25 percent year-over-year to $251.8 million from $201.3 million, and it turned profitable—the company reported net income of $21.6 million in 2020, compared with a loss of $7.8 million in 2019. In the first six months of 2021, the company's net profit grew 77.7 percent to $10.9 million. In the long term, the company expects customer and category expansion to grow its revenue by 25–30 percent.

According to Euromonitor, in 2019, the global fine jewelry market was valued at about $300 billion and the U.S. market at $61 billion. E-commerce, the fastest-growing channel in the U.S., grew 15 percent compounded annually from 2010 to 2020.

Meanwhile, McKinsey expects the fine jewelry market to rebound from the COVID-19 pandemic and grow 3–4 percent per year between 2019 and 2025, expanding from $280 billion in sales to $340 billion–$360 billion. Online fine jewelry sales are expected to grow to 18–21 percent of total jewelry sales by 2025, up from 13 percent in 2019. These conditions should present significant opportunities for Brilliant Earth.

Brilliant Earth’s valuation looks reasonable. Its expected valuation is $1.1 billion, which implies a price-to-2020-sales multiple of 4.4x. According to IPO Edge’s 2022 sales estimates, its EV-to-sales multiple is 2.3x, which is lower than Poshmark's and Kering's multiples of 4x and 4.5x, respectively.

Today's investors tend to be concerned about their investments' environmental impact. Brilliant Earth has become a global leader in providing ethically sourced fine jewelry and has a strong focus on ESG (environmental, social, and governance).

The company also has an inventory-light model, meaning its products are made-to-order and most inventory is virtual. Its efficient showroom complements the company's digital presence and offers capital efficiency, giving Brilliant Earth an edge over its peers. Overall, the stock seems like a good buy for long-term investors.