Why the ammunition stockpile exploded today


What happened

Actions of Ammunition (NASDAQ: POWW) closed 13.7% higher on Tuesday after the ammunition maker announced the resumption of production on a production line of “improved” .50 caliber ammunition.

Production will take place at the Jagemann Munition Components plant, which Ammo acquired as part of its acquisition of Jagemann in March 2019.

The .50 caliber is a big bullet – and could mean a lot of money for ammo. Image source: Getty Images.

So what

Normally this would look like a rather ho-hum announcement, but Ammo noted that the reason it is restarting production is “to meet increased market demand and meet pending orders” – suggesting that restarting production will be accompanied by increased sales. Further reinforcing this thesis, Ammo said he had received “increasing indications of interest in exporting from abroad.”

In this regard, at the end of last month, Ammo noted that it had won a “significant” ammunition export contract from an anonymous foreign buyer.

Now what

The ammunition directorate added that “2021 has started off as a great year for AMMO”. Over the past 12 months, Ammo has generated total sales of just $ 27.3 million. But the company says its .50 caliber production line alone is expected to generate a minimum of $ 40 million in annual revenue “at current production levels,” and if production increases, revenues could exceed $ 80 million. , almost triple the current levels of a single product line. .

No wonder investors are excited.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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