Gun Maker at 2 Year Low

Discussion in 'Stocks' started by vanzandt, Jan 3, 2018.

  1. vanzandt


    American Outdoor Brands Corp.
    Formerly Smith and Wesson

    Hmmmm....Wonder if they are big DNC contributors.
    They should be if they want the stock to rise.
    Here4money likes this.
  2. Here4money


    They should just donate to Breitbart and steer the narrative as to how THIS government is going to take their guns for realsies this time.
  3. zdreg


    buy it around election time if stock is still in the garbage can. maybe there will be an upset.
  4. vanzandt


    Fiscal second-quarter sales at American Outdoor Brands dropped 36% versus a year ago to $148.4 million, and net income plunged 90% from $32.5 million to a measly $3.2 million. The drop in results can be directly attributed to the national political environment, which is very favorable to gun owners.
    It may seem counterintuitive, but gun sales typically jump when people fear gun regulation, and the fear of regulation under President Obama (and potentially Hillary Clinton) has subsided under President Trump. Here's what CEO James Debney had to say about the surge in sales ahead of last year's election:
    Total revenue for the quarter faced a challenging comparison to last year, when we believe strong consumer demand was driven by personal safety concerns and pre-election fears of increased firearm legislation.​
    President Trump's term lasts another three years, so it's unlikely there will be much of a political threat for gun control in the next few years. That'll keep sales and profits down for American Outdoor Brands.
    Inventory is now a problem

    With demand down, gun manufacturers who have increased supply in recent years are now stuck with both excess inventories and excess manufacturing capacity. Management said they're reducing production and they've outsourced capacity to adapt to the market.
    The challenge overcapacity and high inventory create is a race to the bottom for manufacturers. It's costly to just shut down capacity, so it may be more effective to discount products to increase production and keep plants running. But discounts lead to lower margins and erodes pricing power.
    Inventory just started to become a problem in mid-2017, so investors should watch for this to be a big headwind in 2018. That's what happens when years of growing production are met with a sharp cut in demand.
    No value for investors

    Fiscal 2018 guidance is now for $0.33 to $0.43 per share in GAAP earnings and $0.57 to $0.67 in non-GAAP earnings, which pulls out the writedown of acquired assets. Even at the top end of that range, the stock trades at nearly 20 times forward earnings, which is a steep price for a company that's shrinking.
    If a recovery were around the corner, or if American Outdoor Brands's stock seemed like a great value, I could see buying shares. But right now the political environment will keep gun sales down for the foreseeable future, and that will be a drag on both operations and the stock.
  5. Here4money


    Good time to pick up at a discount, I mean an actual gun, not stock
  6. RedDuke


    Here is a strategy:

    GOP in power - light on on weapons stocks
    Dems - load up.

    Idiotic, bit seems like a trend

    P.S. I personally keep my supply at 2k rounds. Own 2 9mm luger guns
  7. Here4money


    Not that easy if the GOP starts armed conflict somewhere.
  8. Overnight


    Nah, best time would be in 2 years when Trump has a year left and the start of the new campaigns. Based on public opinion at this time, the chances of the next pres being a Dem are very good. That should stoke the new cycle of fears about future gun regs.

    Buy the dip in 2 years! (lowest gun prices)