Shares of gunmakers such as Smith & Wesson Brands (SWBI) and Sturm Ruger (RGR) are on the rise on Tuesday, continuing their winning streak, amid the coronavirus pandemic and protests in major U.S. cities following George Floyd's death in Minneapolis police custody last week. While many protests have been peaceful, others have turned violent.
MAY FIREARM BACKGROUND CHECKS: The FBI has reported that there were 3,091,455 firearm background checks initiated through the NICS system in May 2020. This compares to 2,349,309 checks in May of 2019 and 2,911,128 checks in April 2020.
'FEAR-BASED PURCHASES': May adjusted National Instant Criminal Background Check System checks increased 75.2% and state-level data shows broad-based strength, with double digit growth in 49 states, KeyBanc analyst Brett Andress highlighted in a research note to investors yesterday. While the analyst expected strong growth, he believes May "cleared an already high bar." The strength is indicative of continued "fear-based purchases" amid social unrest and COVID-19 uncertainty, Andress contended. He expects positive growth in June and the coming months "as these dynamics linger."
Meanwhile, Lake Street analyst Mark Smith raised his price target for Sturm Ruger to $80 from $68, while keeping a Buy rating on the shares after data showing that FBI adjusted NICS background checks for firearm purchases increased 75.2% year-over-year in May, which he noted was an acceleration from 69.1% growth in April. While this level of demand is “unprecedented” and has continued longer than he expected, Smith sees the high demand as likely to continue into June and through the election this fall given the recent outbreak of civil unrest.
WHAT'S NOTABLE: American Outdoor Brands has changed its name to Smith & Wesson Brands and its ticker symbol from AOBC to SWBI. The name change reflects the company's preparation for the previously announced spin-off of its outdoor products and accessories business as a tax-free stock distribution to its stockholders in late summer 2020, a transaction that would create two independent publicly traded companies, namely Smith & Wesson Brands and American Outdoor Brands. The company also unveiled yesterday the logo for the American Outdoor Brands spin-off company.
PRICE ACTION: In morning trading, shares of Sturm Ruger have gained about 7% to $72.97, while Smith & Wesson's stock has jumped almost 10% to $11.82. Axon Enterprise (AAXN), which makes the Taser stun-gun, has also leaped about 9% to $97.55, and Vista Outdoor (VSTO) has advanced over 11% to $11.84.
Sturm Ruger
+4.5 (+6.58%)
Smith & Wesson Brands
+2.04 (+15.03%)
Symbol AXON
+7.69 (+8.55%)
Vista Outdoor
+1.05 (+9.85%)