Analyst predicts stock surge for guns as estimated sales rebound

A research analyst said this week the firearms industry remains poised to rebound in a big way as federal background check numbers hit new highs.

The Federal Bureau of Investigation processed 1.8 million applications through the National Instant Criminal Background Check System last month. Guns.com estimates about 926,000 guns were sold — nearly 57,000 more than May 2016, the busiest on record.

It continues a trend first noticed in April, when estimated sales eclipsed the previous year by 4,400.

Samuel Smith, a research analyst for Seeking Alpha, said the data suggests analysts and the media got it wrong when prematurely writing the firearms industry off as dead as post-election NICS data came in low.

“Despite the changing data, the media continued the narrative that the industry was in decline and even mocked the NRA’s and firearms companies’ attempts at boosting sales,” he said in an article published Friday. “However, the NICS numbers for May just arrived and show that the trend has actually turned positive year-over-year, setting all-time records for the month.”

It’s exactly what American Outdoor Brands CEO Jeff Debney predicted could happen during a March earnings call with investors, citing the increasingly diversified pool of firearms owners, 38 percent of which are women.

“Despite the recent softening in consumer firearm activity … we maintain a very favorable long-term perspective on the firearms market,” he said. “Overall our belief in firearms is very much about the long term, as we’ve said before. We’re very confident about that.”

Smith said although stock prices for both American Outdoor Brands and Sturm, Ruger have surged about 30 percent from their lowest point this year, “there is likely much more room to run.”

“With the firearms industry shaking off its post-election doldrums and gaining momentum from its primary tailwinds (increasing gun ownership among youth, women, and minorities, growing popularity of recreational shooting, and ongoing geopolitical uncertainty, racial tensions, and terrorist attacks), gun stocks look primed to soar to new highs,” he said.