Please ensure Javascript is enabled for purposes of website accessibility

Wall Street Can't Decide if Smith & Wesson Brands Will Double or Go Nowhere

By Rich Duprey - Mar 8, 2021 at 1:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Confusion reigns over whether the gunmaker can continue beating its record-setting results.

After Smith & Wesson Brands' (SWBI 1.44%) blowout earnings report last week where it said sales doubled for the third consecutive quarter, Wall Street can't decide what comes next.

One analyst says the gunmaker's stock is set to double like its sales, while another says this is as good as it gets.

Pistol laying on $100 bills

Image source: Getty Images.

Carried along by the greatest gun sales boom in history, Smith & Wesson is reporting record results. Sales surged 102% in its fiscal third quarter, which follows a 119% gain in the second and a $127% jump in the first.

The FBI's National Instant Criminal Background Check System conducted 39.7 million background checks of potential gun buyers last year, some 40% more than in 2019, and it's running 41% above that rate in the first two months of this year. 

Lake Street analyst Mark Smith said that although the gunmaker will start to face tough comparables this year because of the pace of growth the industry recorded last year, he believes demand will continue to be strong and Smith & Wesson and the industry will fare well in the long term. He set a price target of $34 per share, 112% higher than where the gunslinger closed last Friday.

Not so, says Craig-Hallum analyst Steve Dyer, who believes that record pace and the difficult comps will be too high of a hurdle for Smith & Wesson to overcome. Because gun stocks typically top out before their earnings do, he sees the gunmaker having a difficult time outperforming and dropped his price target from $19 to $17 per share.

At its current price Smith & Wesson Brands seems deeply discounted, trading at less than eight times next year's earnings estimates and just three times the free cash flow it produces.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Smith & Wesson Brands, Inc. Stock Quote
Smith & Wesson Brands, Inc.
$13.71 (1.44%) $0.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.