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Trump Presidency To Slow The Gun Industry's Momentum

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Trump Presidency To Slow The Gun Industry's Momentum

Following the recent election of a “more gun-friendly Republican administration and Congress, combined with a sluggish start to hunting season due to unseasonably warm autumn weather through much of the country,” Wunderlich’s Rommel Dionisio noted that sales of firearms and accessories have started to significantly decelerate.

Dionisio maintains a Hold rating on Smith & Wesson Holding Corp (NASDAQ: SWHC), while lowering the price target from $29 to $26.

Slowing Firearms Market

The analyst expects the year-on-year monthly comparisons of NICS background checks to turn negative, following a year of robust double-digit growth.

The U.S. firearms market saw two significant spikes following major terrorism-related incidents in November 2015 and June 2016, with NICS background checks growing more than 40 percent year-on-year during December 2015 to February 2016 and more than 30 percent during June–July 2016.

“As demand spikes have historically occurred in the firearms industry, they likely pulled forward consumer firearms purchases from future periods,” Dionisio stated.

Impact Of Trump’s Victory

With many expecting a Clinton win, dealers and distributors had increased shipments prior to the election, anticipating increased demand before tighter gun control legislation was passed.

However, with the Republican victory, if the increased demand does not materialize, dealers and distributors would be stuck in the near term with excess inventory.

Although Dionisio expects Smith & Wesson to aggressively launch new product at the annual Shot Show in January 2017, dealers and distributor demand might be weak overall.

At last check, Smith & Wesson was down 3.86 percent at $22.90.

Image Credit: By Gage Skidmore from Peoria, AZ, United States of America (Donald Trump & Anita Shaw) [CC BY-SA 2.0], via Wikimedia Commons

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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