Helping its customers enjoy the good moments, Solo Brands, Inc. (NYSE: DTC) owns and operates premium outdoor lifestyle brands by marketing and delivering these brands’ products through its direct-to-consumer platform. After surging 54% at the end of May, DTC stock was one of the trending stocks among Reddit and FinTwit investors due to its short squeeze potential. While the stock quickly lost momentum, the company’s brands and fundamentals could make DTC stock a profitable long-term hold.
DTC Stock News
DTC started with its Solo Stove brand delivering high quality fire pits, camp stoves, grill, and accessories to outdoor going enthusiasts. As the company was looking to further develop itself as an outdoor lifestyle brand, DTC acquired three companies in 2021 to increase its market share in the outdoor activities industry. DTC’s first acquisition was Oru which manufactures and sells kayak boats and kayak accessories. This was followed by acquiring ISLE which offers stand up paddle boards and paddle board accessories. DTC’s final acquisition in 2021 was Chubbies which is focused on selling casual wear, sportswear, swimwear, and accessories. Through these brands, DTC became a public company and IPO’ed last October at $17 per share. Although DTC stock lost over 70% of its value since its IPO, many investors are bullish these brands will help the company grow in the long-term.
DTC’s constant growth since its inception is mainly thanks to its enthusiastic management team. With over 50 years of combined experience in the rapidly growing e-commerce industry, DTC was able to grow substantially over the past years. Adding to this proven management team, DTC appointed Somer Web as CFO to oversee the company’s financial growth opportunities. As an expert with 15 years in the finance industry, Webb is mainly engaged in financial planning and analysis, mergers and acquisitions, as well as driving organic growth through business intelligence insights. In light of this, many investors are expecting more growth from DTC in 2022 and beyond.
On that note, DTC’s insiders have been adding more shares since late May. This insider activity is highlighted by DTC’s CEO Merris John adding 90 thousand shares for an average price of $4.89. At the same time, Webb has added over 70 thousand shares since her appointment as CFO. Based on this insider buying, investors are bullish there could be major news around the corner impacting DTC stock.
Many investors are bullish that DTC stock has long-term potential given that it increased its revenue from $39.9 million in 2019 to $133.4 million in 2020. In 2021 its revenue reached $403.7 million which led the company to project $540 million to $570 million in revenue for 2022. This rapid and continued growth is one reason why many believe DTC is an overlooked value stock.
It is also worth noting that DTC stock has strong institutional ownership with 172 institutions holding 77.6 million shares. All of which are long on DTC stock which is a bullish sign for the company’s long-term prospects. This institutional ownership is led by Summit Partners which holds 44 million shares of DTC. In light of this, DTC stock could be a bargain at its current PPS.
With this in mind, analysts are raving about DTC’s potential in light of its ability to generate major revenues and currently has an average price target of $11.83 and a buy rating. Moreover, DTC was ranked as a buy from Zacks Equity Research which considers DTC a better investment than Amazon.
DTC benefited from the pandemic which brought more attention to outdoor recreation and forced more shoppers online. So far it has maintained its growth and its guidance for 2022. The company will release its Q2 earnings on August 11th which will likely have good news since the second quarter is seasonally strong for this outdoor brand. After that it has some new product launches planned for the second half of the year which will continue to bolster its sales.
DTC Stock Short Data
DTC stock gained attention earlier this year for its short squeeze potential and it may again considering its high short interest. According to Ortex, DTC has an estimated short interest of 20.6% and 13.9% of its freefloat is on loan. While the cost to borrow and utilization are not very high, its free float of only 14.7 million shares and OS of 63.4 million shares could make it a promising short squeeze candidate – particularly since there is no obvious, fundamental reason for its short interest to be high.
Since Ortex was previously reporting short interest of 500% and FF of 571 thousand, more updated data or a clarification may be issued.
As more and more investors start taking notice of DTC stock, the company could be positioned to retest its resistance near $6.50 with enough momentum.
DTC Stock Financials
Looking at DTC’s financials for Q1, the company showed major financial growth in a number of key metrics. In terms of assets, DTC reported $882.2 million – an increase from the $837.7 million reported the previous quarter. Although the company’s cash on hand declined from $25.1 million to $15.8 million, its increase in assets is mainly attributed to its $126.5 million inventory. Based on this, DTC could improve its financial position in the coming quarters with the sale of its inventory.
In terms of revenue, DTC witnessed a 19% YOY increase as it reported $82.2 million this quarter compared to the $69 million reported in the same year-ago period. Despite this, DTC increased its operating costs substantially from $22.4 million to $52 million. As a result, DTC reported a net loss of $2 million compared to the $22 million in net income it reported in Q1 2021.
However, it is worth mentioning that DTC considers Q1 to be its lowest quarter for sales – with Q2 and Q4 its best quarters in terms of sales. Based on this, DTC has the potential to further increase its revenues in the coming quarters.
Media Sentiment
@speculatore is watching DTC stock for a move up
Technical Analysis
DTC stock is currently trading at $4.63 and has a weak support near 4.30 as well as a strong support at 4.01. The stock shows resistances at 4.76, 5.72, and 6.51. While many analysts consider DTC to be a strong value stock, it could also catch on as a short squeeze play given its above average short interest and small float. Before its pullback during after hours, DTC stock had increased 20% in just one day.
DTC’s RSI had become overbought before dropping to 58 and the stock’s MACD is bullish to the upside. Accumulation has also been trending upwards – a sign of investors new interest in the stock. As is, DTC has a 63.4 million OS and a low float of 14.71 million according to Ortex. It also has not diluted any shares since its IPO.
DTC Stock Forecast
With a portfolio of brands focusing on outdoor activities, DTC is positioning itself as a leader in the outdoor leisure industry. At the same time, the company is proving to be a promising growth stock as it continues to report revenue growth. Since DTC stock has been able to run on low trading volume, the stock could be worth watching for a run up on a catalyst such as positive Q2 earnings.
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