Options Trade – Smith & Wesson Holding Corp (NASDAQ:SWHC) Calls 
Tuesday, February 03, 2015

**OPTIONS TRADE: Buy the SWHC Mar 2015 12.000 call (SWHC150320C00012000) at or under $0.90, good for the day. Place a protective stop loss at $0.35 and a pre-determined sell at $1.80.

by Ian Harvey

February 03, 2015


The February Barometer provides some vital information in regard to historic outperformers -- this data deals with stocks that have overachieved during a single month – which provides valuable information for short-term traders, particularly options traders.

Smith & Wesson Holding Corp (NASDAQ: SWHC), a manufacturer of firearms, is certainly one of these outperformers in the month of February, where it has rallied in nine of the previous 10 Februaries, with an average return of 14.6%. Last year was a big exception -- when the shares tumbled 12.2% -- but historically, the stock has posted some colossal single-month pops. Most notably, in February 2009, SWHC soared more than 62%. Meanwhile, the firearms security has been crushing it in 2015, tacking on 31% to trade at $12.35.

Technical Details

Smith & Wesson Holding Corp has a one year low of $9.03 and a one year high of $17.28. The stock has a 50-day moving average of $10.46 and a 200-day moving average of $10.75.

The company has a market cap of $657.3 million and a P/E ratio of 10.57.


Smith & Wesson Holding Corp last released its earnings data on Thursday, December 4th. The company reported $0.09 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.07 by $0.02. The company had revenue of $108.40 million for the quarter, compared to the consensus estimate of $105.80 million.

During the same quarter in the previous year, the company posted $0.28 earnings per share. The company’s revenue for the quarter was down 22.1% on a year-over-year basis. Analysts expect that Smith & Wesson Holding Corp will post $0.70 EPS for the current fiscal year.

Smith & Wesson Holding Corp also updated its third quarter earnings guidance on Tuesday, 20th January. The company provided EPS guidance of $0.15-0.16 for the period, compared to the Thomson Reuters consensus EPS estimate of $0.07, Analyst Ratings Network.com reports. The company issued revenue guidance of $124-126 million, compared to the consensus revenue estimate of $117.57 million.Smith & Wesson Holding Corp also updated its FY15 guidance to $0.74-0.78 EPS.

Analysts Opinions

Smith & Wesson was upgraded by TheStreet Ratings on the 28th January from Hold to Buy with a ratings score of B-.

TheStreet Ratings Team had this to say about their recommendation:

"We rate SMITH & WESSON HOLDING CORP (SWHC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had subpar growth in net income."

The company has been also been the subject of a number of other research reports:-

• Analysts at Dougherty & Co upgraded shares of Smith & Wesson Holding Corp from a “neutral” rating to a “buy” rating in a research note on Friday, January 23rd.

• Analysts at Zacks upgraded shares of Smith & Wesson Holding Corp from an “underperform” rating to a “neutral” rating and set a $12.20 price target on the stock in a research note on Thursday, January 22nd.

• Finally, analysts at Wunderlich raised their price target on shares of Smith & Wesson Holding Corp from $13.00 to $15.00 and gave the company a “buy” rating in a research note on Thursday, January 22nd.

Shares of Smith & Wesson Holding Corp have been given a consensus recommendation of “Buy” by the eleven analysts that are presently covering the company, AmericanBankingNews.com reports. One investment analyst has rated the stock with a sell rating, one has given a hold rating and eight have issued a buy rating on the company. The average twelve-month price target among brokers that have covered the stock in the last year is $14.78.


If this technical trend continues, a short-covering rally could ensue. More than one-fifth of SWHC's float is sold short, which would take roughly two weeks to repurchase, at the stock's average daily trading level.

Therefore, based on the facts above the following options trade is recommended…..

**OPTIONS TRADE: Buy the SWHC Mar 2015 12.000 call (SWHC150320C00012000) at or under $0.90, good for the day. Place a protective stop loss at $0.35 and a pre-determined sell at $1.80.

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