- Large companies are lining up for the next stage of e-commerce growth with branded and vertically integrated online direct-to-consumer businesses, like Walmart's $400 million acquisition of Bonobos and Modcloth.
- Immudyne (OTCQB: IMMD) is an online direct-response marketing company that continues to see big year-over-year and (recently) month-over month growth.
- Companies like Immudyne that use Facebook (Nasdaq: FB), Google (Nasdaq: GOOG), and Amazon (Nasdaq: AMZN) to directly market proprietary products will likely be the retail ‘growth’ stories of the future.
Walmart's (NYSE: WMT) $310 million purchase of Bonobos in June went mostly unremarked. Especially in comparison to the $3 billion purchase of Jet.com last summer. But one thing is clear - Walmart is challenging Amazon's dominance in online retail. And branded e-commerce is booming.
The Jet.com acquisition in 2016 wasn't a major step away from Walmart's long-time modus operandi: "Save Money. Live Better." Like Walmart, Jet.com is another discount retailer, though with an e-commerce focus and somewhat unique approach to letting customers' discounts increase as they purchase more. Putting up $3 billion for Jet signals a major foray into the world of online retail, but it was completely within Walmart's wheelhouse.
Bonobos is different. With $100 chinos and $130 dress shirts, Bonobos pushes premium-priced fashion for men, primarily online; their advertising is ubiquitous, as is the name. In March, Walmart also purchased the similar upscale clothing brand ModCloth, which makes clothing for women, for $50 to $100 million (exact details were not disclosed).
An online, upscale branded fashion company does not seem like a natural fit for Walmart. But it is the direction that consumers are moving as more and more people do their shopping online, and large retailers like Walmart understand that the dominant retailers of the future will be those that own the Brands that consumers purchase on the internet.
Bonobos’ CEO Andy Dunn, who is staying on to run the clothing company under the Walmart umbrella, told the New York Times after the acquisition, "I saw Walmart acquire Jet and then ModCloth, and, I thought, they get the future of e-commerce is brands."
That’s exactly the case as the hottest - and most profitable - businesses these days are taking branding seriously, as well as vertical integration. That is, businesses that keep manufacturing, branding, marketing and even fulfillment in-house. Names like Bonobos, Modcloth, Warby Parker, Indochino, and the Dollar Shave Club. These direct-to-consumer brands are already disrupting the apparel and accessories space, but more online-only brands are emerging because of the profit potential.
Now Is The Time For Investors To Capitalize on the Massive Shift From Retail Stores To Online Shopping
Amazon's (AMZN) dominance is not news - the company reported $136 billion in sales in 2016, which was about 35% of the U.S.’ total retail e-commerce that year, according to the Department of Commerce. That’s a staggering figure but explains why the stock is up 300% in five years. Other e-commerce portals have performed just as well, like “the Amazon of Latin America”, Mercadolibre (MELI), which has gone from $70 to $280 in the same timeframe. Chinese booking company Ctrip (CTRP) has boomed, from $8 to $60 since 2012.
What most people don’t realize is the immense room for growth from online retail - the reason that investors continue to bid up AMZN despite a large valuation already. E-commerce still makes up just 8% of total retail purchases in the United States, or 11% excluding fuel, vehicle, and restaurant sales.
Immudyne: A Rapidly Growing Online Marketing Company with Massive Upside
Immudyne (OTCQB: IMMD) is making waves in the branded, vertically integrated online direct-marketing space, of which there are few public options to participate in this latest boom.
The company has been undergoing a major pivot to launch their own branded and vertically integrated product lines sold through online channels. The first of which, the Shapiro MD haircare line, is already demonstrating tremendous traction. The second quarter was the first full quarter in which the company has been marketing the Shapiro MD line, and Immudyne recently reported revenue for the quarter of $1.1 million, a 159% increase over the first quarter of this year.
Immudyne's strategy is to launch additional brands and diversify their product portfolio of health and wellness products. With wholly owned, branded products like these, the key is keeping marketing expenses, what’s also known as customer acquisition costs, in check. Immudyne has brought ad-buying in-house in order to remain well-integrated in the same way that Bonobos and similar brands have done, and investors are noticing - marketing expenses were only 25% of sales during the second quarter. Amazingly, the company has kept returns low based on publicly available filings. In the first half of the year the company reported $50K in customer returns/discounts/rebates, which is about 3% of revenue. This is an amazing number for an online marketing business and what it says to us is that Immudyne’s customers are highly satisfied with the company’s products.
What Should Investors Expect From IMMD?
Growing sales in Q3 and Q4 could justify a much higher valuation for this relatively unknown stock. Many of the Company’s peers trade at multiples of where IMMD is today.
United-Guardian (UG) manufactures supplements and consumer pharmaceutical products and has a $78M market cap with an 7.2x Price/Sales ratio based on last year's sales - and the company has had flat-to-declining revenue for the past 4 years! If we assume IMMD is at or is nearing a $10M run-rate, the Company is trading at a Price/Sales ratio of 4.5x. So, if Immudyne were to come in line with this no-growth peer UG, IMMD’s market cap would be closer to $80M. At an $80M market cap, Immudyne’s price per share would be somewhere in the neighborhood of $1.50 to $2.00 per share. This is a 300-400% premium to where IMMD is currently trading.
Public investors have had few companies through which to invest in the boom in integrated brands, like Warby Parker or the Dollar Shave Club, which means IMMD is a standout among very few peers. 30-day average volume is 2017 has more than doubled compared to last year as investors have picked up on the pivot at Immudyne, and the stock looks like it could be coiled like a spring for its next big move.
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