Bark(US:BARK) Seeking Alphaยท2024-03-08 07:19Investment Thesis - BARK, Inc. is beginning to recover, although the management has a history of missteps [1] - The stock trades just over $1, making it less attractive to institutional investors, and it has recently regained compliance with the NYSE [1] - The stock is perceived as a penny stock, leading to significant price volatility [1] - The current rating is a tepid buy [1] Recent Performance - The share price has increased by 25% since the last analysis, but this is only slightly above the market's 20% increase [3] - BARK's total revenue for fiscal Q3 2024 reached $121 million, with a 280-basis point improvement in gross margin [4] Market Position and Strategy - BARK specializes in pet products, focusing on toys and consumables, and operates a unified online platform for subscriptions [4] - The company is working on improving unit economics and financial health [4] - There are challenges in the core toy category and overall industry growth is subdued [5] Growth Expectations - The CEO anticipates a return to top-line growth in fiscal 2025, with an estimated 3% CAGR [6] - Previous expectations of high single to low double-digit growth have been revised down [7] Financial Health - BARK holds approximately 40% of its market cap as net cash, with $90 million in net cash after accounting for convertible debt [8] - The company generated $17 million in free cash flow over the trailing twelve months, primarily from inventory liquidation [9] - EBITDA margins are expected to improve from negative 3% in fiscal Q4 2023 to approximately 2% in Q4 2024 [10] Valuation - BARK is priced at 16x forward EBITDA, with an estimated EBITDA of $15 million for fiscal 2025 [10][11] - The company is on a path toward financial stability, despite concerns about the sustainability of cash flow from inventory liquidation [11]