- EF Hutton Analyst Michael Albanese initiated coverage Reborn Coffee Inc REBN with buy recommendation with a Price target of $5.50.
- The analyst said the retail coffee market is large, with little overall market growth.
- He added that specialty coffee continues to capture market share and is a key driver of expected future growth as consumer preferences shift toward more carefully crafted coffee beverages.
- The Company has nine company-owned coffee retail locations with five in development.
- Albanese estimates that in a few years, REBN will have 30 retail stores that will generate more than $1.0 million in sales per store with a nearly 20% store-level EBITDA margin and accelerate the momentum of its franchised businesses.
- He believes the current enterprise value of $14.7 million does not properly reflect the opportunities the company faces today and that Reborn is worth closer to $60.0 million with modest assumptions about its growth plans.
- Through H1 2022, comparable sales are up 75% year over year. Store-level EBITDA turned positive, improving to 3.8% in 2021 as newly opened stores reached profitability and the negative impact of COVID eased.
- The analyst expects REBN to improve store-level margins to 20% over the longer term.
- As consumer preferences focus on premium quality coffee, driven by improvements in bean sourcing/harvesting and technologies around processing/roasting, the company’s diversified supply chain, unique washing process and innovative brewing technologies could benefit from the fourth wave of the Coffee production will benefit from a consumer shift towards premium products.
- Capital expenditures, the need for additional funds, inflation and supply chain pressures are some of the risks in this business.
- Price promotion: REBN shares trade 4.72% higher at $1.33 on the latest check Thursday.
- Photo via company
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