Smith & Wesson misfires on Wall Street

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Reloadron

Reloadron

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Smith & Wesson (SWHC +2.96%) might have expected investors to be pleased with its strong earnings report last week, which showed the famed U.S. gunmaker beating analysts' expectations for its first quarter of fiscal 2014.


But its weaker-than-expected​ forecast and news that the nation's recent gun-buying frenzy appears to be over took their toll on the company's share price Friday, knocking it down more than 10% to $10.31.
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The above quote taken in part from here.

While it has regained some of that 10% today (up about 3%) overall gun sales seem to be slowing, that includes Ruger traded under RGR. During Clinton's now defunct AWB with the additional emphasis on handguns (magazine capacities) we saw the same thing happen. Now slowly it seems gun sales in general are slowing. It should be interesting to see how this effects overall production and production goals.

Ron
 
I think that correlates to what we're seeing in the stores. Almost any firearm is available from multiple sources, save the custom models and such.

I don't know if any of the ammo companies are publicly traded, but I would assume they're still seeing high numbers.
 
Gun buyers greatly accelerated their purchasing during the panic. They pre-consumed what they would be buying right now.
 
Midwest said:
If people can't find ammo or have to pay through the nose for it...it will slow down firearms sales. Whats the point in buying a gun when you can't find ammo for it?
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When you could not find a single round of 5.56 short of paying a buck a round it didn't stop those wanting an AR from paying $1,200 to $1,500 for what were $800 AR rifles on gun broker and the like. The idea being that people were buying the things up and not just buying them but buying at inflated prices. Only once it was apparent that Obama wasn't going to get his desired AWB did prices on the guns start to come down.

I really don't know. Looking back to the Clinton years what we saw was a total saturation of the market and then the buying slowed down. I tend to agree with ATLDAVE:

Gun buyers greatly accelerated their purchasing during the panic. They pre-consumed what they would be buying right now.
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Ron
 
It's a pullback, "to be expected", it may be a buying opportunity. But in general I don't like stocks at all, even after trading for 12 years full time out of an office, then the house. I think it's a dangerous time to be in the market, unless you can afford to lose what you are playing with.
The computer models have taken over, and it is much harder to get in and out than it used to be.
There is no reason to be hitting all time highs with half the country out of work, and interest rates starting to effect the housing market again.
Guns may become quite valuable again if we tank. I for one am out, on the sidelines, in cash, for the first time since the 70's.
I see the same guys cheering on the market that got slammed every time this same nonsense happens.
 
The forecast, which is just an estimate, was lowered by S&W due to having to halt production for a few days while making an internal system change.
 
gym said:
It's a pullback, "to be expected", it may be a buying opportunity. But in general I don't like stocks at all, even after trading for 12 years full time out of an office, then the house. I think it's a dangerous time to be in the market, unless you can afford to lose what you are playing with.
The computer models have taken over, and it is much harder to get in and out than it used to be.
There is no reason to be hitting all time highs with half the country out of work, and interest rates starting to effect the housing market again.
Guns may become quite valuable again if we tank. I for one am out, on the sidelines, in cash, for the first time since the 70's.
I see the same guys cheering on the market that got slammed every time this same nonsense happens.
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I can agree with that. As my wife and I approached retirement we became very conservative with investing. Today what was years ago a large investment portfolio is now a few mutual funds with modest investments. I like being retired and have no plans for a need to return to work as it would interfere with my range time. :)

I enjoy following the market but invest? No way, those days are long over.

Ron
 
I bought S&W shares when they were low. They are still undervalued, I think. Much cheaper than Ruger. I am OK with a recession cycle. I can enjoy relative peace while it lasts, while hedging my bets in the gun sector. The bad moon may rise again, and the arms manufacturers will get busy.
 
I don't believe that any of the major firearms makers (and Smith & Wesson in particular) have come close to filling all of the backorders they have on their books.

And if our government in Washington does something really, really stupid with the current events in the Middle East the demand for guns and ammunition might go through the roof again.
 
Exploiting periodic buying panics is not a good long-range business plan for the gun companies. In general, companies whose share prices do well are those which innovate. But here's the problem for the gun industry: it represents a mature technology in which products haven't essentially changed since the days of John Moses Browning. Not only that, but the products, with reasonable care, last practically forever. Unless a gun company invents a directed-energy weapon, for example, I wouldn't invest in it.
 
I have to agree with AlexanderA... That's the question that always needs to be answered... How much growth potential is there in the company/stock? Sometimes there's an anomaly and the valuation is very low or very high. Other times, you have to answer the previous question.

With firearms, who are your target consumers? And how much can you get them to buy? Outside of the USA, it's almost exclusively government bodies and private contractors who will buy with any volume that could impact the bottom line. Lots of competition there and the contracts can be game changers for one company or another.

In the USA, and like other companies, they need to find niche markets for growth, e.g. ccw market. What else is there? convincing people they need defensive carbines and defense shotguns... there might be a couple other things if I got creative. Hunter buying will stay consistent... possibly could start marketing rifles like golf clubs and "innovating" with a new model every year...

Anyway, point is that it IS a mature market with a very mature product. Two years ago when S&W was trading for $2.50, I started integrating it as a part of my daily portfolio and played with it until it was about $9.80. I've been out of it since January. There could still be plenty of movement potential but I think the "sure thing" phase is over. Any near term future involvement with the stock on my part will be politically driven as I believe that is what will drive the price up or down for the foreseeable future. my 2 cents... and it's not even worth that. HA
 
Building on posts #16 & #17, given the restrictions on firearms ownership in other countries, it's not like the gun companies can expect to grow much in foreign markets, either.
 
Seems like a fairly standard market correction. Only reason this made news is someone thought a story about an evil gun company dropping its stock price would make their readers feel all warm and fuzzy. Got to justify all those fund managers that dropped gun related stocks after Newtown.
 
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