AMMO Inc. (NASDAQ: POWW) stock is in rally mode following the US Department of State's (DOS) announcement of plans to prohibit the importation of Russian ammunition into the United States. That order is expected to take effect the first week in September. According to the release made public on the DOS website, "[n]ew and pending permit applications for the permanent importation of firearms and ammunition manufactured or located in Russia will be subject to a policy of denial." Keeping in mind that AMMO already had a revenue generating tailwind at its back after reporting record-setting revenues and EPS, the stakes going forward get even larger. And that's potentially great news for AMMO shareholders.

In fact, from a revenues perspective, its likely the prohibition will add considerably to an already substantial $238 million order backlog reported at the end of last quarter. Better still, since the DOS policy intends to prohibit the importation of both firearms and ammunition, AMMO can utilize its Gunbroker.com asset, with its six million active users, to target several revenue-generating sectors. And, while its fair to suggest that standing backlogs don't equate to cash, for AMMO, they will. Moreover, with an enhanced manufacturing facility expected to increase capacity by nearly 4X, that backlog can turn from orders to cash faster than expected.

And, remember, the American gun markets already suffer from demand exceeding the available supply, Store shelves across the country are bare, with both Big Box and small retail struggling for inventory. Sector analysts don't expect demand to lessen anytime soon either. They see the move by the DOS doing two things- exacerbate the current supply problems and strengthen an already booming market. Both assumptions play into AMMO, Inc.'s favor.

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Adding To Record-Setting Momentum

Moreover, the expected surge in demand to an already booming market is more than good news from a sales perspective, Laws of supply and demand should lead to higher prices, stronger gross margins, and extended sales visibility for AMMO. Even better, with the order expected to remain effective for at least 12-months, AMMO can see these potential benefits within the next few weeks and should last at least for the next four quarters.

Hence, despite AMMO raising its revenue guidance by 12% to $210 million in revenues this year, changes to the playing field may put another revision in play. Based on the market conditions, expect any revision to be toward the upside. Thus, AMMO's 11% jump in August to date may be the precursor of more substantial gains to come.

Even its current quarter expectations may be light. That number , too, was raised, with AMMO now expecting to post at least $51 million this quarter. More importantly, higher gross margins and a reduction in operating expenses can make those revenues more impactful. And strength in the current quarter would follow a record-setting quarter for both revenues and EPS, where AMMO posted a NET INCOME of $9.5 million that smashed its ($3.1 million) loss in the same period last year.

Bullish Guidance And Optimistic Attitudes

And don't think AMMO isn't bullish on its own future. They are. Comments made during its earnings call earlier this month gave every indication that its company is in hyper-growth mode. Better still, they have substantial growth targets in its crosshairs. They support their optimisitc posture by not only being intimate with the markets on the ground but also from knowing that its Gunbroker.com asset has far more to contribute once fully integrated. Only about $12 million of high-margin marketplace revenue came through its Gunbroker.com acquisition last quarter. Expectations is for that number to surge in coming quarters.

That makes sense, especially noting despite the massive active user base at Gunbroker.com, ammunition sales accounted for only 3% of its revenues last year. Hence, AMMO inherits an enormous revenue-generating opportunity from that group alone. Even better, with GQ Magazine reporting that the average gun owner spends roughly $250 per year on ammo, training, and supplies, tapping into even a small percentage of that six-million-member group could deliver an exponential surge in revenues.

Then, factor in that its new facility is can potentially quadruple production to meet demand from its presence in more than 1600 direct-to-consumer locations, it's almost futile to argue against AMMO's bullish posture. As if that wasn't enough to expose the value proposition, the near-unprecedented levels of new gun permits should strengthen an already strong business tailwind into the next few quarters.

One other thing. AMMO said to expect a potentially big announcement no later than the first part of September. Speculation is that the company is close to inking a major deal in the military and defense sector. It could be a reason why the CEO offered his opinion that AMMO could become a $400 million company within the next three years. That's a near doubling of expected revenues this year.

Hence, there's a lot to like about AMMO, Inc. The better news is that they keep adding more to that list.

Strength To Reach A $32 Billion Marketplace

Topping the list right now is corporate strength and targeting robust market opportunities. Already a top five ammunition and munitions supplier in the US, AMMO benefits from being a well-respected and trusted supplier of products to law enforcement, military, and consumer markets. That's a consideration not to be underappreciated, especially with billions in military contracts typically up for grabs each year. And while AMMO has grown into its $838 million market cap, it's deserving of more on a revenues-multiple basis. In fact, its accelerating growth in revenues and best ever earnings is worthy of a significant premium.

Further, AMMO proves its worth, expecting to sell upwards of 750 million rounds of ammunition this year. And that's not including a potential near-term military contract that could exponentially increase those totals. Better yet, with AMMO quickly integrating its Gunbroker.com asset, the company is in its best position ever to capitalize on the $32 billion in sales from its core target markets. Thus, despite its August run and more than 129% share price increase in 2021, AMMO stock remains a bargain. Record sales, highest ever profits, and a backlog that is near $240 million, justifies that premise. Moreover, it puts it 52-week high of $10.37 in its crosshairs, a number, by the way, that could be quickly breached on near-term news.

Still, consider that just a short term target. AMMO, Inc. and its stock price will likely grow appreciably more in the coming weeks and quarters.

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