BarkBox IPO: The Next Chewy Or Charlie Brown?

I had never heard of BarkBox before today’s announcement that they were doing a SPAC merger with Northern Star Acquisitions Corp (STIC.U). Upon learning of the merger, I went to the company’s website and saw Snoopy and Charlie Brown prominently displayed as part of a limited-edition box. Apparently, there’s a special bonus of a Peanuts-themed toy or seasonal snack in the box every month. I guess this is exciting for those intersectional enough to be dog owners and Peanuts fans.

As you consider the prospects for BarkBox, is their future closer to Chewy Inc (NYSE: CHWY) or Charlie Brown?

BarkBox Introduction

Following the merger, the combined company (BarkBox) will have an enterprise value of $1.6 billion and will be listed on the NYSE using the ticker symbol “BARK.” What a deal! I’m surprised that nobody else had snatched that one up. The deal will supply the company with approximately $454 million in cash.

Typically, the point of going public is to raise capital for expansion. That appears to be what BarkBox is doing. They plan to invest in creating new and beefing up existing product lines, and also expanding internationally. The company projects that the current fiscal year, ending on March 31, will bring in about $365 million in sales, a 64.6% growth rate from 2020.

The company generates its revenue through its 1 million subscribers and the five product lines that are at 23,000 retail outlets. The outlets include companies like Target, Petco, and Costco.

BarkBox Valuation & Projections

It’s always difficult to value companies that are new, and BarkBox is no different. However, the company has provided a revenue projection and we have a company in CHWY that is very similar. This will allow us to do some comparison of the two companies and look at the earnings performance of CHWY.

Valuation

Chewy has a current price-to-sales ratio of 5.9. That figure is the highest valuation the company has achieved and has a median value of 3.13. Gaining a perspective on the valuation of CHWY is tough as well since the company went public in June of 2019. But we’ll do the best we can.

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