D.A. Davidson Sees Stability Returning To The Firearms Industry

Analysts at D.A. Davidson recently released a report on the firearms industry that includes the latest monthly background check numbers and an updated outlook for firearm stocks. Here’s a breakdown of the report.

Background Checks Indicate Flat Growth In April

NSSF data for the month of April shows year-over-year (Y/Y) U.S. firearm background checks for the month were down 0.1 percent to 986,357. The April numbers fall between the 3.0 percent decrease during March and the 1.3 percent increase reported in February.

April's background check totals are the third highest April totals in 17 years of data.

Overall, NICS background checks in 1Q15 were down 0.6 percent Y/Y as the industry has cooled off from the 5.8 percent Y/Y increase it saw in 4Q14.

Related Link: Smart Guns Could Put An End To Accidental Shootings

Industry Stabilizing

While the April numbers were slightly down Y/Y, analysts see recent data as a signal that the industry could be stabilizing after several years of volatility. They believe that retailers Sportsman's Warehouse Holdings Inc SPWH and Cabelas Inc CAB could see this stabilization reflected in their same-store sales numbers this year.

Store Tracker

In April, Cabelas opened two new stores, one in Garner, North Carolina and one in Sun Prairie, Wisconsin. In addition, the company announced plans to open a new store in Avon, Ohio in late 2016.

Sportsman's Warehouse opened a single store in Klamath Falls, Oregon in April.

Overall, analysts see new outside competition as "a manageable headwind" for the two companies.

Outlook

D.A. Davidson has a Buy rating on Cabelas and a $68 target on the stock.

It also has a Buy rating on Sportsman's Warehouse and a $13 target on the stock.

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