Smith & Wesson Brands Inc

Smith & Wesson Brands, Inc. (NASDAQ: SWBI) is a manufacturer of firearms products. The Company manufactures a range of handguns (including revolvers and pistols), long guns (including modern sporting rifles), handcuffs, firearm suppressors, and other firearm-related products for sale to a wide variety of customers, including firearm enthusiasts, collectors, hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, law enforcement and security agencies and officers, and military agencies in the United States and throughout the world.

Recent Financial Update:

• Financial Highlights for the Full Year Fiscal 2023:
• Net sales for the full year were USD 191.2 million, showing a decrease of USD 56.3 million or 22.8% compared to the previous year's net sales of USD 247.5 million. When compared to the pre-COVID levels in fiscal 2020, total net sales grew by 14.2%. E-commerce sales witnessed substantial growth of 60.6%, while net sales through traditional channels declined by 8.0%.
• The gross margin for the full year was 46.1%, a slight decrease of 10 basis points from the previous year's gross margin of 46.2%.
• The full year GAAP net loss amounted to USD 12.0 million, or USD 0.90 per diluted share, in contrast to a GAAP net loss of USD 64.9 million, or USD 4.66 per diluted share, in the previous year. The net loss in the prior year included a non-cash goodwill impairment charge of USD 67.8 million.
• Non-GAAP net income for the full year was USD 6.6 million, or USD 0.48 per diluted share, as opposed to non-GAAP net income of USD 24.7 million, or USD 1.77 per diluted share, in the prior year. The adjustments from GAAP to non-GAAP net income exclude non-cash impairment of goodwill, acquired intangible amortization, stock compensation, and other costs.
• Adjusted EBITDA for the full year was USD 12.8 million, which represents 6.7% of net sales, compared to Adjusted EBITDAS of USD 35.0 million, or 14.2% of net sales, in the previous year.

Financial Highlights for the Fourth Quarter Fiscal 2023:

• Net sales for the quarter amounted to USD 42.2 million, showing a decrease of USD 3.7 million or 8.0% compared to the net sales of USD 45.9 million in the same quarter of the previous year. When compared to the pre-COVID levels in fiscal 2020, quarterly net sales declined by 2.0%. However, e-commerce sales experienced a slight growth of 0.7%, while net sales through traditional channels declined by 4.3%.
• The gross margin for the quarter was 45.2%, indicating an increase of 140 basis points compared to the gross margin of 43.8% in the same quarter of the previous year.
• The GAAP net loss for the quarter was USD 3.8 million, or USD 0.29 per diluted share, compared to a GAAP net loss of USD 76.7 million, or USD 5.71 per diluted share, in the same quarter of the previous year. The net loss in the prior year included a non-cash goodwill impairment charge of USD 67.8 million.
• Non-GAAP net income for the quarter was USD 793,000, or USD 0.06 per diluted share, compared to non-GAAP net income of USD 1.9 million, or USD 0.14 per diluted share, in the same quarter of the previous year. The adjustments from GAAP to non-GAAP net income exclude non-cash impairment of goodwill, acquired intangible amortization, stock compensation, and other costs.
• Adjusted EBITDA for the quarter amounted to USD 1.8 million, representing 4.3% of net sales, compared to USD 3.2 million, or 7.0% of net sales, in the same quarter of the previous year.

Technical Observation (on the daily chart)

The stock has been in an uptrend since making its 52-week low on December 22, 2023, with a return of around 60.98% since then. This uptrend trend is also evident in the medium-term, with a return of 35.41% in the previous six months. The price is currently near an important resistance zone of USD 13-USD 14, from where the stock has corrected in the past. The momentum indicator RSI (14 period) currently stands at 48.64, suggest some short-term consolidation. It is worth noting that the price is currently trading between both the 21-day and 50-day SMA trend-following indicators, and these SMAs will act as short-term resistances and supports respectively.  

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is July 11, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

Disclaimer

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