Why Smith & Wesson (SWBI) Shares Are Plunging Today

What Happened:

Shares of american firearms manufacturer Smith & Wesson (NASDAQ:SWBI) fell 10.3% in the morning session after the company reported second-quarter earnings results. Its revenue and EPS unfortunately fell short of Wall Street's estimates. Notably, revenue fell 23% y/y as demand for firearms was softer than expected despite the anticipated seasonal summer deceleration. Encouragingly, management noted that demand picked up in August. Overall, this was a weaker quarter.

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What is the market telling us:

Smith & Wesson’s shares are not very volatile than the market average and over the last year have had only 7 moves greater than 5%. Moves this big are very rare for Smith & Wesson and that is indicating to us that this news had a significant impact on the market’s perception of the business. .

The biggest move we wrote about over the last year was 6 months ago, when the stock gained 29.6% on the news that the company reported fourth-quarter results that blew past analysts' operating margin and EPS expectations. Its revenue also outperformed Wall Street's estimates. 

Management noted it "gained market share as our shipments outpaced the overall firearm market" and that it "expects the firearm market to experience healthy demand through the 2024 election cycle". 

For context, firearm sales typically rise in each election year as consumers fear potential policy changes and stockpile goods. Smith & Wesson's Board also authorized a $0.12 per share quarterly dividend. Zooming out, this was a fantastic quarter that should have shareholders cheering.

Smith & Wesson is down 3% since the beginning of the year, and at $13.05 per share it is trading 27.7% below its 52-week high of $18.04 from March 2024. Investors who bought $1,000 worth of Smith & Wesson’s shares 5 years ago would now be looking at an investment worth $2,142.

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