Good Tuesday morning, everybody. We hope you had a nice long weekend. It's time to get back in the saddle though, and as promised in Friday's edition we've got a new trading idea for you that has the potential to do even better than Friday's 27% gain on SunOpta (STKL).
I'm going to do things in a slightly different order today than we normally do it, and take a look at the chart of this stock first. Why's that? Because the chart alone tells about 90% of the relevant story. Take a look.
For the record, that's a 563% gain just since the end of November last year.
The follow-up question: How did that happen? The answer is, the stock's chart merely reflects the company's growth.
Interested?
As you may have already surmised from the subject line of this newsletter, that chart plots the recent, relentlessly-bullish movement from Sack Lunch Productions (SAKL). You've probably never heard of it. You probably have, however, heard of or about its flagship product... a come-one, come-all event called Slide the City, which converts a city's streets into a 1000-foot Slip-n-Slide most of us remember from our youth.
And yes, a 1000-foot Slip-n-Slide is a 1000 times more fun than the watery 10-foot plastic sheets most of us had growing up.
It's not just Slide the City event that Sack Lunch Productions puts on though . It's also the name behind Lantern Fest, The Dirty Dash, the Color Me Rad 5K run, and most recently, the Trike Riot. Those are a flying lantern release, a mud run, a color-splashing fun run, and a tricycle riding course, respectively. They're fun for kids of all ages, but you'd swear the adults were having more fun being kids than the kids themselves.
The business model is pretty much what you'd expect. What's unexpected are the numbers the businesses are producing. These events each draw a few thousand people on a regular basis, and each of those participants drives anywhere between $29 and $90 worth of revenue per event. Just crunching a few numbers, one 2500 person event multiplied by $30 per head translates into $75,000. Not bad for what amounts to a couple days' work from a relatively small crew. The company doesn't even need its own crew to host events now though. It's been bringing franchisees into the fold to do the on-site work while Sack Lunch Productions management team does what it does best - markets the daylights out of the product, and teaches more and more franchisees to take the proverbial ball and run with it.
It's working too. The proof is in the numbers.
Based on last year's revenue growth of 121% (to just under $10 million), and factoring in the bookings it's already got for 2016, the company anticipates more than $18 million worth of revenue for 2016. That's a minimum of 80% revenue growth, and I think it could end up being considerably more than that when all is said and done.
Better still, huge revenue growth has already translated into massive income growth. Sack Lunch Productions swung to a profit last year, and as it scales up even further it expects to produce about $3.4 million in net income for 2016.
That's some serious growth, and a solid bottom line for a company with a market cap of $9.3 million. The forward-looking P/E ratio of only 2.7 is eye-popping as well. And yet, the growth we've seen so far has only scratched the surface.
See, the bulk of Sack Lunch Productions' events thus far have taken place in the United States, but the U.S. is only called home to about 5% of the global population. It recently added franchises in Europe, China, and South America, and already anticipates between 45 and 80 overseas Slide the City events taking place in 2016. Geographic diversity also takes away some of the seasonality of the company's revenue stream.
The clincher came today.
The full press release is below, but I'll sum it up right here... Sack Lunch Productions is getting real serious about corporate sponsors for its events rather than targeting consumers directly.
It's certainly much easier to make money with that approach. On its own, the company must do all the promotional work, and collect payment one consumer at a time. With a corporate sponsor footing the bill (often for a special event) and generally gathering the crowd for SAKL, Sack Lunch Productions more or less just has to show up and set up. And let's face it... corporate sponsors have deep pockets. Per the press release, the company expects between 20% and 30% of its future revenue could be corporate sponsors.
Some of these sponsors are head-turning companies too. They've included Sprint, Chick-Fil-A, Vivent Solar, Nestle Nesquick, Nickelodeon, GoPro, and more. With names like those tapping SAKL, clearly what the company brings is the real deal.
I believe Sack Lunch Productions was doing some corporate-sponsored events anyway, but with the company making a point of saying it's putting an organized plan in place to win and deliver such business, odds are good the market is going to have a real "aha" moment with SAKL today.
With all of that being said, any discussion of Sack Lunch Productions has to explain the underlying trend that's making such growth possible.
In short, consumers are no longer into buying/owning stuff. They're into buying and consuming experiences. Rather than insisting on putting a pricey imported sports car in the driveway, people are opting to buy a more affordable America-built sedan instead, and using the savings to make memories. In a recent poll of millennials and the gen-y crowd, 78% of them said would rather spend money on an event or experience rather than a thing.
As for the "why?," this segment of the population has really come to terms with the idea that goods like cars and clothes only lose value, and the thrill of owning them is fleeting. Perhaps enough of them have bought enough stuff for full price in a store only to sell it on eBay a year later - at a fraction of the purchase price - to force them into rethinking what's important.
It's not just the eBay in-and-out cycle opening the younger crowd's eyes to the quick-devaluation of things, though. It's the internet as a whole, and Facebook in particular. Facebook is littered with stories of members' activities and experiences. Seeing their friends do activities and experience things is the new "me too" market. The proof? A hefty 69% of millennials acknowledge they have a fear of missing out on experiences other millennials are experiencing.
Here's the thing... it's not just millennials. Though they're taking the lead, gen-Xers, baby-boomers, and most other groupings are starting to want experiences and memories more than physical items.
And yes, this is one of those mega-trends we talk about from time to time in the newsletter. The experience market in the United States alone is estimated to be worth more than $20 billion per year.
The usual conditions for this trading idea apply of course. Those are, never allocate more to one trade than you can afford to lose, and be smart about managing the trade before and after you enter it if you choose to do so. Specifically, use a smart entry limit, and once you get in, apply a stop to protect yourself. Scoot the stop-level up as the trade progresses too...
... although given the current trajectory of the stock's chart, it's tough to imagine all those defensive measures would matter.
Bottom line? Sack Lunch Productions is a high-performance company with the numbers to back the idea up. All it will have to do to reach its lofty 2016 goals -- 80% revenue growth and a move deep into the black -- is keep doing what it did in 2015. At the heart of the company's growth, though, is an insatiable social movement that puts more value on memories than merchandise. This makes SAKL very much a right time, right place, right product kind of opportunity. The fact that it's going to start getting paid by more corporate-level sponsors is just the clincher for the concept. Investors could respond very well to this news today.
Here's the press release.
SAKL's Slide the City(R) Event Procures Multiple International Sponsors
SALT LAKE CITY, UT -- (Marketwired) -- 05/31/16 -- Sack Lunch Productions, Inc. (OTC PINK: SAKL) is pleased to announce that Slide the City® has locked up a number of well-known brands that will be sponsoring many of our events domestically and internationally.
SAKL's business model currently generates most of its revenues from ticket sales and franchisee fees. However, SAKL is currently refining sponsorship opportunities and expects that as much as 20% to 30% of our revenues could be generated from sponsorship opportunities in the future. SAKL currently has a wide range of companies that are sponsoring specific cities for cash, in-kind or both.
The following is a partial list of current U.S. Slide the City® sponsors: Chick-fil-A, Nestlé's Nesquik, Fiat Romeo, Sprint, State Farm Insurance, Burger King, Andersen Windows, Vitamin Water, Cricket Wireless, Kona Ice, Vivent Solar, Krave Jerky, Power Crunch, Metro PCS. And, Internationally: Nickelodeon (Latin America); Go-Pro, Spritzer, MyFM, Tantan, and Tourism Pahang (Malaysia).
Last year, international and domestic sponsors have included: Sprite, Aape, Hong Kong Airlines, Nestle, CBS, Vita Coco, Uber and others.
Richard Surber, CEO, stated, "Our team has done a phenomenal job of procuring household brands as sponsors for Slide the City®. What's more exciting is that we expect to land many more additional sponsors in 2016 and beyond. The opportunities are mind boggling. The plan is to convert current companies only sponsoring a limited number of events and have them sponsor all or nearly all of the Slide the City® events system-wide. I believe that we will be able to find one or more multi-million dollar sponsorship opportunities as we grow our businesses and prove up the benefits of sponsoring our events. Furthermore, our team has assembled a roster of sponsors for all other brands as well. We will continue to develop and improve these opportunities indefinitely."
If you would like to sponsor any of our fun filled events including Color Me Rad®, Slide the City, The Lantern Fest®, The Dirty Dash® or Trike Riot® please email: richard@sacklunchproductions.com
About Sack Lunch Productions, Inc.:
Sack Lunch Productions, Inc. (OTC PINK: SAKL) is an entertainment company that operates and franchises action oriented events in the U.S. and internationally. SAKL's events include: Slide the City (1,000 foot long water slide for families and kids), Color Me Rad (5k color race), The Dirty Dash (mud and obstacle run), The Lantern Fest (nighttime party with lantern lighting and launch) and Trike Riot (a trike bike obstacle course). Learn more about SAKL's operations at www.sacklunchproductions.com, www.slidethecity.com, www.thelanternfest.com, www.thedirtydash.com, www.colormerad.com, www.trikeriot.com and www.green-endeavors.com.
SAKL strongly encourages the public to read the above information in conjunction with its reports filed at www.otcmarkets.com. The actual results that SAKL may achieve could differ materially from any forward-looking statements due to such risks and uncertainties. Investors should not invest more than they can afford to lose.
IR CONTACT: Bruce Haase RedChip Companies, Inc. 800.733.2447, ext. 131 bruce@redchip.com
Source: Sack Lunch Productions, Inc.