Smith & Wesson Brands, Inc. shares crashed on Friday after the company's Q2 earnings report missed analysts' estimates as panic hoarding guns by Americans eased.
Sales fell 7.3% in the quarter as gun demand subsided, prompting Cowen to downgrade the stock from "outperform" to "market perform". Cowen analyst Cai Von Rumohr slashed the price target to $22 from $38. The average price target is approximately $30.50.
Shares of Smith & Wesson are down more than 17% in premarket to about the $19 handle.
Rumohr said the quarter's huge miss, share loss, increasing channel stocks, and reversal of strong pricing are tough comparables for the upcoming quarters. He was unclear if the stock would remain popular considering the increased popularity of ESG issues.
Mark Smith, President and CEO, said, "throughout the past 18 months of unprecedented demand levels for our industry, our focus has continued to be on the long term – and our team has been hard at work positioning Smith & Wesson for continued impressive operating results and maintaining our market leadership regardless of market conditions."
"During our second quarter, as demand levels eased from historical highs experienced during the height of the pandemic, the results of those efforts and our flexible model were evident," Smith said.
The first suspicion we had that panic hoarding was subsiding was after reviewing ammo prices in June. At the time, we pointed out prices were dramatically slumping from COVID highs.
Then September's FBI background checks for firearms plunged to the lowest levels in 22 months which sealed the deal that panic hoarding guns lost momentum.
Since the pandemic began, millions of new gun owners and existing gun owners have bought pistols, shotguns, and rifles and loaded up on ammo. As for Smith & Wesson shares, the next level of support to test will be around $17.