Shares of American Outdoor Brands (NASDAQ:AOBC) may look like they've taken a big hit because of the election of Donald Trump, but that doesn't mean they can't fall further still. Even though the stock is down just 2% over the past year, it's lost about a quarter of its value since the election and plunged more than 35% from its 52-week high. As bad as that is, things can get worse. Here are four reasons why American Outdoor Brands stock might fall further still.

Image source: Getty Images.

Gun demand evaporates

Obviously, the top reason the gunmaker's stock is depressed is fear that gun buying demand is drying up. Operating under the notion that it was simply fear of stricter gun control laws being enacted under President Obama, a new administration presumably more favorable to gun rights will remove the need for people to run out and buy a gun rightthisminute!

The FBI's December data might even bear out that concern. Where gun buyers had set records for 19 straight months of buying more guns than the year before for the same period, last month's data broke that streak. If the data for January and February follow suit,  American Outdoor Brands' stock will likely take an additional hit.

New products don't sell

The first product the company introduced in 2017 wasn't for its new rugged outdoors market it is targeting, but for the firearms industry it is seeking to minimize. The new Smith & Wesson M&P M2.0 is a feature-rich handgun that first will be offered in full-sized 9 mm, 40S&W and .45 Auto versions, with the promise of future additions and extensions, suggesting it will eventually launch smaller models for the concealed carry segment, too.

Although the M2.0 has gotten high marks from reviewers, if it doesn't catch on with the buying public, or to the same extent other new products have, American Outdoor's stock could be impacted.

Image source: Smith & Wesson.

Last year it introduced the M&P15-22 Sport modern sporting rifle, an updated version of its immensely popular M&P 15-22, that was credited with helping push new products to account for almost 30% of firearms revenue last quarter. In anticipation of last week's SHOT Show in Las Vegas, American Outdoor unveiled over 100 new products for 2017 that spanned all of its divisions. Even so, it may not be enough to replicate the success it has enjoyed thus far.

When rival Sturm, Ruger (NYSE:RGR) reported its third-quarter results in November, it said new product revenue would decrease next quarter because it was lapping the introduction of its own popular modern sporting rifle, the AR-556. For American Outdoors, fewer new product sales would translate into fewer total overall sales, and that could spook investors.

The rugged outdoors is a long-term opportunity

One of the arguments in favor of Smith & Wesson changing its name and focusing on the rugged outdoors market was that it would smooth out the volatility associated with firearms while diversifying its revenue. And because the outdoors market is largely countercyclical to the firearms business, it would make for less lumpy results.

But this new market opportunity, while quite large, is going to take awhile for American Outdoor Brands to penetrate, and it might not be as successful as hoped for. A number of big-name retailers in the space have run into financial troubles, including Sports Authority and Sports Chalet going bankrupt, and Cabela's (NYSE:CAB) being forced into accepting a takeover bid by Bass Pro Shops. It's going to reduce the number of outlets available to sell its goods and points to an industry that may be weakening just as American Outdoor is going in.

Image source: Getty Images.

While much of what it will sell is complementary to its existing product line, forays into a business it may be unfamiliar with, such as its acquisition of Ultimate Survival Technologies, make the transition less than assured. And though it has big plans for the future, they are well into the future indeed. Anyone expecting immediate results will undoubtedly be disappointed if it doesn't produce them.

Little things add up

American Outdoor Brands is also still trying to get its Thompson/Center Arms business positioned just right. While the recent break up of divisions seems intuitively correct, the fact that it's taken the company so long after its acquisition to figure it out means other acquisitions may not go as smoothly, either.

The rugged outdoors market, like the firearms business, is very competitive and because it's lower margin, we'll see profit levels diluted. All of these factors could lead to smashed expectations, causing the decline already witnessed in American Outdoor Brands' stock to turn into a rout.