December 20, 2012 09:30 ET

Aftermath of Newtown's Shooting on Smith & Wesson and Dick's Sporting Goods

The Provides Stock Research on Smith & Wesson Holding Corp. and Dick's Sporting Goods Inc.

NEW YORK, NY--(Marketwire - Dec 20, 2012) - Special Note from - Our prayers and hearts are with every parents, family members and friends that have had to bear the burden of losing a loved one in the Sandy Hook Elementary School tragedy. They were all loved here on Earth, they will all be cherished there in Heaven. 

The tragic events of last week in Newtown, Connecticut have sparked a fury of legislative activity, gun control debates, stock fluctuations as seen by companies like Shares of Smith & Wesson Holding Corp. (NYSE: SWHC) and Dick's Sporting Goods Inc. (NYSE: DKS), and a disturbing amount of gun and gun accessory sales in anticipation that legislation would be tougher. The following will examine each of these reactions and offer some thoughts on what the future impact will be. 

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Market activity has been mixed in the last week. Shares of Smith & Wesson Holding Corp., a provider of products and services for safety, security, protection, and sports in the United States and internationally, began to drop Friday afternoon immediately following the events in Connecticut but have rebounded sharply in the last day of trading. The quick drop off could be attributed to a knee jerk reaction on behalf of investors to distance themselves from all stocks that are gun related. However, as news reports began to highlight the surge in gun sales this week, numerous stocks have recovered and been upgraded to outperform.

Reactions from private equity firms with stakes in gun makers have reacted differently in the last 6 days. Some have already announced intentions to divest themselves of such stocks while others remain mum on what actions they will or will not take. Public and investor sentiment may eventually compel them to sell while analyst upgrades and improved sales forecasts may convince them to take no action or even up their investments. 

Fears of increased legislative activity have triggered a flurry of gun purchasing activity in the wake of the tragedy. Prices for magazines at major online auction sites have nearly tripled. A North Carolina gun shop saw one day sales top $1 million marking the best day of sales in its over 50 year existence. Even more startling, sales of the pricey Bushmaster AR-15, the model used in the shooting, has been one of the top sellers. This trend of higher sales after a tragedy has been seen before and will likely continue until Washington weighs in possible legislative changes next month. Evidence of stronger sales can also be seen in the weeks that followed this summer's shooting at a Colorado theater. While many companies were hesitant to reveal sales, background checks, which are part of the public record, increased sharply and are often representative of demand levels. A similar increase in background checks can likely be anticipated when records are made available at the end of the month. 

Gun makers have not been the only companies to have been directly influenced. Several sporting good and retail outlets are witnessing revenue surges. Some sporting goods stores have reacted more reasonably in the past week. Dick's Sporting Goods Inc., for example, announced Tuesday that it had suspended sales of sporting rifles at all of its stores. Furthermore, it completely removed all guns and accessories from the store closest to Newtown. No timetable was offered for the resumption of such sales but the move has been met positively by the public thus far.

On the legislative front, President Barack Obama called upon Vice-President Joe Biden to lead a task force on gun control Wednesday. The President went on to say that he will announce the vice-president's recommendations at the State of the Union address in January. He has said that he is in support of restricting military style assault weapons and high-capacity ammunition clips. It is not yet clear if the task force will push for bans, increased mental health access or a combination of both. It is also unclear how much resistance to bans House Republicans will have. Any legislative efforts could also likely encounter opposition in the form of increased lobby efforts from the National Rifle Association and similar organizations.

Moving forward, the long-term ramifications of the tragedy will come into clarity when the findings of Biden's task force are revealed next month. Near-term record sales of guns and accessories will likely continue. 


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