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Here's Why Smith & Wesson Benefits From 'Normalized' Demand

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Smith & Wesson Holding Corp (NASDAQ: 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 (NYSE: 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.

Latest Ratings for SWHC

DateFirmActionFromTo
Nov 2016Lake StreetDowngradesBuyHold
Oct 2016WunderlichDowngradesBuyHold
Jun 2016WunderlichMaintainsBuy

View More Analyst Ratings for SWHC
View the Latest Analyst Ratings

 

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