Smith & Wesson Slumps as Market Cools, Craig-Hallum Cuts Target

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By Dhirendra Tripathi – Smith&Wesson (NASDAQ:SWBI) stock tumbled 19% in premarket Friday as market for guns and firearms cooled off “significantly” in the quarter through January.

Net sales plunged 31% to $178 million as the market retreated from the height of the pandemic surge, and according to President and CEO Mark Smith, “Seems to now be following pre-pandemic historical demand patterns.”

Brokerage Craig-Hallum cut the target for the stock to $17 from $25 earlier, according to StreetInsider. The stock closed at $17.89 Thursday.

Margins shrank, too. Also, thanks to expenses incurred on the relocation of the company’s headquarters to Maryville, Tennessee from Springfield, Massachusetts as a proposed law in Massachusetts sought to prohibit the company from manufacturing certain firearms that contributed as much as 60% to the company’s revenue in the last financial year.

Last year, Iowa, Tennessee, and Wyoming joined the list of states that allow those 21 and older to carry handguns without a permit. Even before that, Tennessee ranked as one of the most violent states in the U.S.

Net profit in the third quarter nearly halved to $33 million on an adjusted basis. Both sales and earnings were below estimates.

According to the company, the demand surge that began in March 2020 generated enough cash for it to become debt-free and buy back $200 million of stocks besides paying dividends and making investments in the business. After all that, it still was left with $107 million in cash, the company said.

Smith&Wesson will pay a quarterly dividend of 8 cents.

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