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Should You Buy Smith & Wesson Brands on its Post-Earnings Dip?

Stock MarketsDec 09, 2021 10:31AM ET
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© Reuters. Should You Buy Smith & Wesson Brands on its Post-Earnings Dip?

The shares of firearm company Smith & Wesson Brands (SWBI) declined nearly 30% in price on December 3, due primarily to investors’ pessimism about the company’s weaker-than-expected second-quarter earnings. Nevertheless, let’s evaluate if it is wise to buy the dip in the stock now based on the company’s consistent product launches. Read on.Springfield, Mass.-based firearm products manufacturer Smith & Wesson Brands, Inc. (SWBI) witnessed robust demand for its products earlier this year, due in varying degrees to COVID-19 pandemic-induced high demand, a change in the U.S. presidency, and civil unrest.

According to National Shooting Sports Foundation data, more than 3.2 million people purchased a firearm for the first time during the first half of 2021. Also, SWBI is expected to pay a $0.08 per share quarterly dividend on January 3, 2022.

However, the stock has lost 17.2% in price over the past month to close yesterday’s trading session at $17.85. Furthermore, its shares plunged 29.9% on December 3, putting it on track for its biggest one-day selloff since March 2020. This is due primarily to its weaker-than-expected second-quarter earnings and a decline in demand levels from the pandemic-related highs. Also, in May, SWBI also announced its plans to divest its Thompson/Center Arms brand. So, the stock’s near-term prospects look uncertain.

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Should You Buy Smith & Wesson Brands on its Post-Earnings Dip?
 

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