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In 2017, Smith & Wesson had a display at a National Rifle Association meeting.
Getty Images/Scott Olson
The stock of Smith & Wesson has risen about 50% since the gunmaker posted solid earnings last month, but the boom in demand that has boosted the stock could be receding. The adjusted number of background checks in June was 41% lower than a year ago, according to data from the National Instant Criminal Background Check System, or NICS. While there isn’t a one-to-one correlation between gun purchases and background checks, Wedbush analyst James Hardiman believes the NICS data are the greatest overall predictor of demand.
Nonetheless, he said that last month’s checks were the second-best on record for any June. Only June of last year, when checks were 136 percent greater than June of this year, had a higher total number of background checks on handguns, which account for 78 percent of all background checks.
Smith & Wesson’s (Smith & Wesson)
Last month, weapon sales were down 47 percent year over year, while long gun sales were down 35 percent. Cai von Rumohr, a Cowen analyst, believes that fewer people are purchasing guns for personal defense for the first time, but that a rise in purchases last June established an exceptionally high reference point. Background checks for handguns were 178 percent higher in June 2020 than in June 2019. Even if demand is waning, von Rumohr believes there is no risk of overproduction. He pointed out that distributor inventories equal one week’s worth of sales. In afternoon trade, Smith & Wesson shares was down 12.5 percent to $31. The S&P 500 was up 0.3 percent, while the Russell 2000 was down 1.1%./n
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