Smith & Wesson Holding Corp SWHC is profiting from a gun industry turnaround as dealers' inventory pruning comes to an end, an analyst said Wednesday.
The firearms manufacturer changed hands recently up more than 8 percent at $14.18. The company on Tuesday beat earnings expectations and raised its outlook.
Wunderlich's Rommel Dionisio boosted his target 13 percent to $17 and said improving fundamentals coupled with a major military contract will drive the stock higher.
Smith& Wesson's shares tanked last year when firearms sales fell from inflated levels after the so-called "Obama gun bubble" completed its course.
Dionisio said falling dealer inventory and a "normalizing of demand" are encouraging signs for gun makers generally, and for Smith & Wesson in particular.
Competitor Sturm, Ruger & Company RGR has seen its shares gain more than 26 percent sine the company released a similarly upbeat outlook last week.
Sturm changed hands recently at $54.01, up 2.5 percent.
Dionisio said dealers' reduction in inventory will end by this summer, enabling gun makers to boost capacity utilization and thereby post wider profit margins.
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