The BarkBox IPO Guide for the $69 Billion Pet Industry Disruptor

The pet industry is currently a $69 billion market, according to CNBC, and investors looking for a way to profit may soon have their chance through the BarkBox IPO.

BarkBox sends a curated box of bones, toys, treats, and accessories to subscribers each month.

BarkBox IPO

The boxes have fun monthly themes like "Chewrassic Bark," with items that include treats named "Jurassic Pork," and a toy dinosaur.

And disrupting the pet industry with a subscription service is proving to be prolific...

The U.S. pet industry's value climbed from $60.29 billion in 2015 to $69 billion today, a 14.4% increase in just three years.

But that growth is increasingly concentrated in web sales. U.S. consumers are visiting subscription service websites more than ever before.

In 2014, subscription service websites received roughly 4.1 million searches per month.

As of April 2017, that number skyrocketed over 800%, to 37 million monthly visitors, according to Forbes.

Now investors are getting a chance to profit from this trend when BarkBox goes public.

Today, we wanted to offer Money Morning readers a detailed guide on BarkBox, which includes its history, valuation, and how to buy BarkBox stock.

Most importantly, we'll also answer the question of whether you should buy BarkBox stock when it goes public.

Let's start with how this innovative subscription service was formed...

BarkBox's History

BarkBox was founded in 2011 by CEO Matt Meeker, Henrik Werdelin, and COO Carly Strife.

Meeker is the co-founder of the online social networking service Meetup, and Werdelin is the founder of the New York City-based venture development firm Prehype.

Strife worked at Uber from January 2011 to December 2011, according to her LinkedIn profile.

And the inspiration for the dog subscription service came from Meeker's 150-pound Great Dane.

The CEO had a difficult time finding retailers in New York City that sold products tailored for dogs of all sizes.

He saw a problem and decided to fix it himself...

When signing up for BarkBox, customers have three box sizes to choose from to tailor the selections to their dogs: "Small & Cute" (0-20 pounds), "Just Right" (20-50 pounds), and "Big & Bold" (50+ pounds).


What Is BarkBox?

A 12-month subscription costs $20 a month, or $240 per year. A six-month subscription costs $25 a month, or $150 for half a year, and a one-time order costs $29.

This innovative structure helped the company turn a profit as of Q1 2017. BarkBox expected revenue of $150 million for 2017 and for revenue to climb 66%, to $250 million, by the end of 2018.

But despite the revenue growth, BarkBox could become an acquisition target thanks to its modest valuation...

How Much Is BarkBox Worth?

Compiling data from comparable public companies, Forbes projects BarkBox is worth between $150 million and $200 million.

And that valuation means a lot of big-name players could be interested in acquiring the subscription service...

Meeker told CNBC that he sees Inc. (Nadsaq: AMZN) as a competitor, but he also sees them as a potential partner.

Because BarkBox's CEO will never beat the $619 billion e-commerce giant, he might prefer an acquisition by AMZN.

Bark is only reaching 500,000 subscribers right now, while being acquired by Amazon would give Meeker access to its 300 million users.

Amazon has $24.31 billion in total cash on its balance sheet, so it could buy the pet subscription service tomorrow if it wanted too.

Outside of Amazon, Target Corp. (NYSE: TGT) could be a potential buyer. The retailer partnered with BarkBox in August 2017 and currently sells its products in stores and on its website.

But with Target being a potential buyout candidate of its own, it may not be in the market for new acquisitions.

And if BarkBox isn't acquired by another company, it could IPO as early as June....

When Is the BarkBox IPO?

In a Dec. 5, 2017, CNBC report, Meeker said he wants an IPO in as soon as six months.

That would place the BarkBox IPO date as soon as June 2018.

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As more details emerge about when BarkBox plans to go public, we will keep our readers up to date with our free Profit Alerts service.

But if the company goes public, here's how to buy BarkBox stock...

How Do I Buy BarkBox Stock?

There will be two prices for the BarkBox IPO: the BarkBox IPO offering price and the price retail investors will have to pay.

The IPO offering price will only be offered to hedge funds, big banks, large institutions, and well-connected investors. It will also be cheaper than what retail investors will have to pay.

For example, wealthy insiders purchased shares of Snapchat for $17 per share before retail investors could purchase SNAP stock. When SNAP stock was made available to retail investors on March 2, it opened at $24 per share.

Unfortunately, retail investors can only purchase BarkBox stock through a brokerage firm on the day of the IPO and won't have access to the offering price.

Editor's Note: For more information on finding the right brokerage for you, click here.

This leads us to the most important question investors will ask themselves when the BarkBox IPO date is announced: "Should I buy BarkBox stock?"

And Money Morning Director of Technology & Venture Capital Research Michael A. Robinson has a very clear answer for potential investors.

Robinson has been a giant in tech investing for more than 30 years.

His privileged access to technology-pioneering CEOs... prize-wining scientists... and high-profile industry insiders has allowed him to consistently give investors huge gains on remarkable breakthroughs.

Those who listened to his recommendations on rare earth metals, for example, would've seen cumulative gains of 990% in just 16 months.

Because of his winning track record, I had to share his advice on whether Money Morning readers should buy BarkBox stock...

Should I Buy BarkBox Stock?

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Robinson doesn't believe retail investors should invest in overhyped IPOs.

"I generally tell retail investors to avoid buying an IPO at the open, because the insiders have already made all the money available at the debut," Robinson told me.

You see, in hopes of finding the next Facebook Inc. (Nasdaq: FB), retail investors poured their hard-earned money into Snap Inc. (NYSE: SNAP).

On March 2, 2017, Snapchat stock opened at $24 per share and climbed to an intraday high of $29.44 on March 3.

Unfortunately, investors who bought in at the all-time high have watched SNAP drop to $13.66 per share, a 53.60% drop in less than a year.

But because the pet industry is so valuable, we still uncovered a way to profit from the $69 billion market.

Blue Buffalo Pet Products Inc. (Nasdaq: BUFF) develops, produces, and sells dog and cat food with high-quality ingredients.

Its food does not use chicken byproducts, which consist of necks, feet, and intestines. Blue Buffalo considers these ingredients as a way to "cut corners" in providing protein, according to its website.

The pet food company also doesn't include corn, wheat, or soy proteins, because they are considered less complete and lower-quality sources of protein.

Corn, wheat, and soy are also common allergens in pets, according to the company.

Now, it's true that higher-quality animal food will cost more money. A 24-pound bag of Blue Buffalo's Adult Grain Free Chicken Dry Dog Food costs $45.59 on Amazon.

In comparison, a 33-pound bag of Pedigree Adult Complete Nutrition dog food costs $18.99 on Amazon.

But "pet parents" - Blue Buffalo's term for animal owners - are willing to pay more for a premium product...

Since 2012, Blue Buffalo has grown its revenue from $523 million in 2012 to $1.15 billion in 2016. That's a 119.88% increase in just four years.

Year Revenue Gross Income
2012 $523 Million $211.95 Million
2013 $719.51 Million $297.61 Million
2014 $917.76 Million $366.87 Million
2015 $1.03 Billion $418.83 Million
2016 $1.15 Billion $515.68 Million

And Blue Buffalo is still in the early stages of just how much revenue it can generate...

Right now, the company feeds just 2% to 3% of the 164 million pets in the United States, according to its website.

According to my back-of-the-envelope calculations, Blue Buffalo is generating annual sales of $345 per customer.

If Blue Buffalo eventually reaches just 5% (8.2 million) of all U.S. pets, that could push its revenue all the way up to $2.8 billion, a 153% increase over 2016 U.S. sales.

And Blue Buffalo says it has a proven new user acquisition strategy and is committed to converting more pet parents into "True Blue Believers."

While the company doesn't specifically talk about its acquisition strategy, it did say in a 2016 prospectus that it deploys "Pet Detectives" to interact with pet owners one-on-one as they shop in specialty stores.

Blue Buffalo also has a full-service, in-house advertising and marketing agency, and the company spent over $500 million between 2003 and 2016 to build its brand awareness.

And because the company still has a lot of pets it can feed, analysts are bullish about BUFF stock...

On Jan. 16, Susquehanna Financial Group released a "Buy" rating for BUFF stock, with a one-year price target of $42 per share.

From today's opening price of $33.62, that's a potential profit of 24.92% over the next 12 months.

People will always buy dog food, and more and more people are owning dogs. That makes Blue Buffalo a stable investment with potential to outperform the Dow Jones Industrial Average. In fact, the BUFF stock price has climbed 21.07% in the last three months, while the Dow is up just 12.75% during that same time.

The Bottom Line: BarkBox could go public as early as June 2018, but we don't recommend buying BarkBox stock on the IPO date. Retail investors are never the ones who make the most money from public offerings. Instead, the better way to make money from the pet industry is to buy Blue Buffalo stock.

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