Analysts weighed in on gun maker Smith & Wesson Holding Corp (NASDAQ:SWHC) and storage networking company Brocade Communications Systems, Inc. (NASDAQ:BRCD), as shares of both companies fell sharply today. Let’s take a closer look.
Smith & Wesson Holding Corp
Shares of Smith & Wesson dropped nearly 18% after brokerages Cowen and BB&T Capital downgraded the stock. Also joining the party was Wedbush analyst James Hardiman, which reiterated a Neutral rating on the stock, with a price target of $26, which implies an upside of 14% from current levels.
Hardiman noted, “Friday afternoon, National Instant Criminal Background Check System (NICS) data was released. While there isn’t an exact one-to-one correlation between gun sales and NICS checks, NICS is seen as the best overall indicator of monthly gun sales. As expected, we saw another strong month of sales, albeit showing a deceleration versus the prior couple of months.”
“This deceleration was in our thinking when we downgraded the stock to NEUTRAL following the large NICS growth numbers coming out of December. Our concern has been that a significant portion of the current surge in sales is demand being pulled forward from future periods, rather than incremental demand, a concern that was echoed by Sportsman’s Warehouse when they reported a couple weeks back,” the analyst concluded.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst James Hardiman has a yearly average return of 7.6% and a 55% success rate. Hardiman ranked #786 out of 3775 analysts.
Out of the 9 analysts polled by TipRanks, 4 rate Smith & Wesson stock a Buy, 4 rate the stock a Hold and 1 recommends a Sell. With a return potential of 36%, the stock’s consensus target price stands at $31.07.
Brocade Communications Systems, Inc.
Shares of Brocade Communications tumbled nearly 14% today after the company announced its intent to acquire Ruckus Wireless for $6.45 in cash and 0.75 shares of Brocade for each Ruckus share.
BMO Capital analyst Tim Long was the first to comment: “We believe Brocade is paying a fair price to acquire an attractive asset in Ruckus, the largest independent WLAN vendor remaining in the market. The two companies fit well from a strategic standpoint, as the acquisition will provide Brocade with exposure to a growing market and will enable the company to compete more effectively with Cisco and HPE by offering a complete enterprise edge portfolio offering. We believe the integration risk in minimal, with the companies having already worked together as partners for nearly two years. We believe there are potential revenue synergies as well, as Ruckus should benefit from Brocade’s strong position with U.S. Federal and, to a lesser extent, large enterprise customers, whereas Brocade could potentially leverage some of Ruckus’s relationships with service providers.”
Despite a positive note, the analyst reiterated a Market Perform rating on shares of Brocade, with a price target of $10.
According to TipRanks.com, analyst Tim Long has a yearly average return of 3% and a 47% success rate. Long is ranked #1071 out of 3775 analysts.Out of the 16 analysts polled by TipRanks, 3 rate Brocade stock a Buy, 12 rate the stock a Hold and 1 recommends a Sell. With a return potential of 15%, the stock’s consensus target price stands at $10.58.