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Why Shares of Smith & Wesson Are Getting Crushed Today

By Scott Levine – Dec 3, 2021 at 2:32PM

Key Points

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Investors are unhappy with how badly this gunmaker missed the target last quarter.

What happened

On a day when many stocks are down, investors in Smith & Wesson Brands (SWBI) are seeing red. As of 12:15 p.m. ET, shares are down 29.3%.

Investors are clicking the sell button today in response to the fiscal second-quarter earnings report, which the company released yesterday after the market closed. But that's not the only catalyst for investors' chagrin; Wall Street's critical take on the stock is providing additional fodder for the bears.

A person aims a rifle at a shooting range.

Image source: Getty Images.

So what

Falling short of analysts' expectations that it would report revenue of $265 million and earnings per share (EPS) of $1.29, Smith & Wesson reported Q2 2022 sales and EPS of $231 million and $1.13, respectively. Aside from missing analysts estimates, investors are likely disappointed with the company's cash flow in the recently completed quarter. Whereas Smith & Wesson generated $55.3 million in cash from operations in Q2 2021, it reported negative $3.7 million for Q2 2022.

In addition to the company's earnings report, Wall Street's pessimism is motivating investors to exit their positions. According to, Cai von Rumohr, an analyst at Cowen, downgraded the stock to market perform from outperform and slashed the price target to $22 from $38. Similarly, Mark Smith, an analyst at Lake Street, revisited his price target, cutting it to $38 from $43.

Now what

Although some people may be disappointed with the company's earnings, investors with a long-term investing horizon -- our favorite type -- shouldn't panic at the sell-off. On the conference call, management remained committed to its gross margin and earnings before interest, taxes, depreciation, and amortization guidance, suggesting that the company's current supply chain challenges aren't insurmountable.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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