We came across a bullish thesis on Build-A-Bear Workshop, Inc. (BBW) on Eloy Fernández Deep Research’s Substack by Eloy Fernández. In this article, we will summarize the bulls’ thesis on BBW. BBW Technologies, Inc.’s share was trading at $32.75 as of Sept 27th. BBW’s trailing and forward P/E were 9.25 and 8.80 respectively according to Yahoo Finance.
Build-A-Bear Workshop, Inc. (BBW), founded by Maxine Clark in 1997 in Delaware, began as a mall store where families could create their own stuffed animals. The company aims to provide a fun and personal shopping experience, highlighted by unique activities like the “heart ceremony,” which fosters customer loyalty. Build-A-Bear operates in a competitive toy market in the United States, Canada, the United Kingdom, Ireland, etc which is dominated by big players like Mattel and Hasbro. Approximately 95% of total sales from Direct-to-consumer, while about 4% is generated from commerical partnerships and remaining 1% comes from international franchises. BBW also licenses its brand and creates content with Sony and Netflix.
Build-a-Bear Workshop with a target price of $61 seems like an interesting pick as BBW’s ability to charge higher prices due to its value-added service allowing it to maintain gross margins superior to peers like Mattel and Hasbro helps it maintain mid-single-digit operating margin, despite being in a discretionary spending category. BBW’s expansion into high-traffic entertainment venues such as Six Flags, SeaWorld, and Carnival Cruise Line helped it counter the declining mall traffic. Additionally, the company’s omnichannel strategy shows its adaptability to changing consumer behavior and focus on efficient operations. BBW’s digital marketing efforts have successfully engaged a broader customer base, including teens, adults, and collectors, further fueling brand loyalty. Collaborations with over 75 well-known franchises across film, TV, games, and sports expand BBW’s appeal and demographic reach. Patents that extend into the 2030s provide protection and stability for future innovation.
From a growth perspective, the company has seen a 34% CAGR in digital demand since 2016, with 2021 digital sales reaching $73 million. BBW continues to leverage its digital transformation and omnichannel capabilities to expand cross-channel growth. Its revenue per square foot is rising, supported by a measured expansion strategy into new territories.
With tourism on the rise, BBW benefits from exposure to cruise lines and park attractions, further driving revenues. Given these factors, and the company’s ability to deliver record-setting financial results even after navigating the challenges of the pandemic, BBW appears well-positioned for continued growth.
Build-A-Bear Workshop, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held BBW at the end of the second quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of BBW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BBW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.