Shares of gunmaker Smith & Wesson took a recent hit amid three analyst downgrades to “neutral.” But this may be the perfect time to "load up on stock," The Street.com
"Smith & Wesson just got ahead of itself," Longroad Asset Management founder Paul Couglin told The Street. "So it went from being up 26% on the year to up 7%. Americans like guns and I don't think anything is stopping that."
Of Smith & Wesson's eight listed analysts, the average 12-month price target is $30 for SWHC stock, with no analysts maintaining Sell ratings, based on consensus data compiled by Bloomberg. Smith & Wesson stock (SWHC)
recently traded at $23.75.
In the three recent downgrades — by CL King, BB&T and Cowen — the key factor cited was that booming U.S. demand for firearms seemed to be weakening as of late. The firms pointed to data from the National Instant Criminal Background Check System, which reported that the number of background checks for gun buyers fell 13.2% in March from the month prior — the “weakest of the past decade and well below 10 year averages,” wrote the team of analyst at Cowen led by Cai von Rumohr.
BB&T analysts also cited the surge in demand for guns as a problem for Smith and Wesson. Brian Ruttenbur wrote that increased consumer demand chipped away at the company’s inventory — suggesting that the gunmaker would have to rely on outsourced production if demand does pick up, Fortune
reported. “We believe Smith and Wesson’s increased use of outsourced production will limit its sales and margin upside in the near-term,” Ruttenbur wrote.
To be sure, Seeking Alpha
agrees that gun-related and firearm stocks will be a safe investment bet not only through this election year, but beyond.
“Gun manufacturers have enjoyed unprecedented growth throughout Barack Obama's presidency,” Seeking Alpha’s Sean Gardner explained.
“Obama has received bipartisan criticism on his policies regarding gun legislation and the Second Amendment. Many Democrats have criticized his inaction on the issue. In 2010, the Brady Campaign to Prevent Gun Violence gave Obama an "F" in every single issue it covers referencing his inaction and lack of leadership on gun reform,” he wrote.
“Conservatives across the aisle like Sen. Marco Rubio have blasted Obama as being "Obsessed with undermining the Second Amendment," and it hasn't stopped there. The NRA has also stayed firm in its opposition to Obama, releasing a video in January arguing that Obama and Democratic front-runner Hillary Clinton support gun confiscation similar to that of Australia following the mass shootings of 1994.”
(Newsmax wire services contributed to this report).
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