The ride with Topps via Mudrick Capital (MUDS) has been entertaining as of late. The SPAC, MUDS, buying Topps, got dragged into a Reddit/WallStreetBets battle without fault of its own. The parent company of the SPAC buying Topps went against the crowd when it offered some value concern sentiments around AMC Entertainment (AMC) . It caused a rally cry against MUDS, even though Topps had absolutely zero to do with the decision nor did it have anything to do with their business. I believe that has provided a nice opportunity on the overall pullback it has caused.
Speaking of business, Topps released their earnings report this morning and it was everything I wanted to see. Net sales grew 55.3% to $166.6 million with net income moving from $400,000 to $23.4 million! Margins improved, both net and gross, as well as adjusted EBITDA. In short, the company is firing on all cylinders.
Often neglected confectionary sales grew 11.3% while sports and entertainment sales doubled. The eye-popping numbers come from every metric in the sports and entertainment segment. Physical sales up 101.7%, digital sales up 111.1%, and gift cards up 131.4%.
Looking ahead, management projects sales for 2021 to land in the $740 million to $760 million range. That puts the full year growth rate in the 31% to 34% range with adjusted EBITDA growing 41% to 52%, landing around $130 million to $140 million.
Overall, the sports and entertainment segment blew past my expectations. NFTs certainly helped bring notoriety to the name, but they are hitting it out of the park across the board. Management did reaffirm their relationship with Major League Baseball (MLB) for physical, digital, and NFT products. I expect future NFT drops will help provide a catalyst for the stock outside of the normal news.
For MUDS, the technical setup is a bit of a challenge. Ideally, bulls will get a close above $12 to help jumpstart shares back to the upside. We've seen a decent three-day bounce, so seeing a little sell-the-news today isn't surprising. I do like the bullish turns we're seeing in the Full Stochastics and MACD plus the parabolic stop-and-reverse (PSAR) triggered bullish as well.
Overall, I view the downside around $11 while the upside sits in the $13.4 to $14 range but the pesky 21-day simple moving average (SMA) sits in the way. With a risk around $0.75 and a potential reward of $1.75 to $2.25, this one should offer a nice entry this week. I suspect the $11.50 to $11.75 will hold and may take a day or two to play out, but I'm willing to add some shares again.