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Vista Outdoor Scores An Upgrade From KeyBanc

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Vista Outdoor Scores An Upgrade From KeyBanc

KeyBanc Capital Markets has upgraded Vista Outdoor Inc (NYSE: VSTO) to Overweight despite acknowledging second-quarter results could be messy and result in a lowered guidance.

"[W]e view a vast majority of the issues that plagued the Company in F1Q17 as transitory and maintain a shift in wallet share toward firearms accessories should occur in the coming quarters and the hangover from Sports Authority/Sports Chalet liquidations will likely be a F1H17 event," analyst Scott Hamann wrote in a note.

Hamann expects continued solid demand for ammo at least in the near to intermediate term. Further, the analyst's checks show that if Hillary Clinton is elected, it would result in meaningful demand for .223/5.56mm and 9mm.

Meanwhile, the brokerage's study found that over 60 percent of accessories for MSRs occur after — but within 12 months of — the initial purchase. As such, the analyst said accessory/optics demand will improve once wallet share shifts from the ongoing surge in MSRs.

Going forward, Hamann believes the investor day in November could serve as a potential catalyst as the company is expected to provide more visibility into the business.

Related Link: Argus Raises Dick's Sporting Goods Price Target, Expects Market Share Gains

Further, the analyst is positive on the fundamentals despite expecting a tepid second quarter and gloomy outlook.

"[W]e believe that the current valuation largely prices in a potential guidance cut and we view current levels as having a favorable risk/reward dynamic," Hamann added.

Shares of Vista Outdoor closed Tuesday's trading at $39.98. Hamann has a price target of $48, representing a potential upside of 20 percent.

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Latest Ratings for VSTO

DateFirmActionFromTo
Jul 2020B. Riley FBRDowngradesBuyNeutral
May 2020B. Riley FBRMaintainsBuy
Apr 2020B. Riley FBRMaintainsBuy

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