The Supreme Court overturned Roe V Wade, a controversial decision that has stripped Constitutional protections for abortion rights. Such an action has the Justices receiving unprecedented criticism. So, it’d be easy to overlook another ruling issued by the Court: That New York’s “may-issue” concealed carry permit program — which has mostly denied the issuance of permits to New York residents — is unconstitutional.
The ruling effectively forces New York to instead issue a permit to anyone requesting one (lest they fail a background check). This paves the way for other states with similar programs to be sued for imposing similar “may-issue” policies. Hawaii, California, Washington. D.C., and other states are likely to be forced by lower courts to convert their concealed carry programs to a “shall-issue” policy, like New York must do now. Naturally, this has sent firearm stocks skyrocketing.
Smith & Wesson’s shares have bounced back more than 25% from a two-year low. Sturm, Ruger & Co. Inc saw a 71% rally in just two days following the ruling, its share price roaring back from an 18-month low last Wednesday. But logistics and supply problems continue to plague the greater industry: Smith % Wesson’s earnings report indicates that net income fell by 60% since last year, earning just $36.1 million last quarter, compared to $89.2 million mid-2021. Although the company’s revenue beat analysts’ estimates by a healthy margin, it still fell by 44%. With average prices-per-unit climbing 12%, what gives?
The root of the issue is supply: Unit production is down nearly 50% at Smith & Wesson’s plants, and they aren’t alone. Other manufacturers have struggled to satisfy orders, putting a significant squeeze on a supply chain that was already struggling back in 2020 to meet historic demand. The problem isn’t unique to Smith & Wesson, either. Gun sales have continued to outpace the market’s ability to stock dealer shelves, and the Supreme Court’s ruling is expected to exacerbate these issues.
But where gun dealer’s shelves are empty, online stores that sell parts kits and individual, aftermarket components are thriving. That’s because prospective buyers and veteran gun owners alike are turning to a “buy-it-then-build-it” scheme to get their hands on new rifles and pistols. Where GLOCK fails to put new 17 and 19-series pistols in stock, buyers turn to simply purchasing a glock kit: A set of factory parts that includes everything but the frame of the pistol itself. And where Smith & Wesson, Ruger, and a plethora of other rifle makers struggle to supply stores with black rifles, buyers turn to AR 15 kits.
Importantly, these kits don’t include the component of the firearm that is considered, well, a firearm under federal law. That singular part is usually the stripped receiver or frame; the primary housing that contains the fire control parts or the AR lower parts kit. Buyers are instead sourcing the serialized frame or receiver from FFLs and dealers that can at least source those individual pieces. It’s also easier for manufacturers to push out these stripped parts for the sake of raw material and production squeeze.
The end user must still assemble the firearm using tools and, occasionally, more advanced machinery. But the end result is a finished firearm that performs identically to its retail counterpart, albeit without the buyer dealing with the months-long wait and ever-growing premiums found on dealers’ price tags. As Congress passes its first bipartisan gun bill in decades, and as a controversial SCOTUS signals a sudden willingness to define Second Amendment rights, one thing remains certain: Firearm sales and a growing “build-it-yourself” market will continue to grow, as supply struggles.
Smith & Wesson (SWBI), Ruger (RGR), Remington owner Vista Outdoor (VSTO), and ammo manufacturer Olin Corp (OLN) remains hot stocks to watch.