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What happened

Ammunition maker AMMO (NASDAQ:POWW) provided an upbeat estimate for first-quarter revenue this week, but it wasn’t enough to offset negative news on firearms sales. As a result the company was down 9.9% for the week as of 1 p.m. EDT Thursday.

So what

AMMO shares have shot higher in 2021, up nearly 150% on the year as investors have taken notice of its explosive growth. The company did little this week to stall that momentum, announcing it expects revenue of $44 million in its fiscal first quarter. That would be a substantial boost from the last quarter, when AMMO generated $24.2 million in sales and is also above the single analyst estimate for $41.3 million in revenue.

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CEO Fred Wagenhals said in a statement, “we also plan to report our first positive net income quarter,” another positive sign for investors.

But investors appear to be more focused on macro issues that impact the firearms and ammunition industry. The Federal Bureau of Investigation announced on July 2 that the background checks required to get a new firearm were down 22.3% year over year to just over 3 million. Although background checks aren’t the perfect measure for ammunition sales since those who already own a firearm need ammunition, the whole sector tends to trade on the monthly FBI numbers.

Now what

For long-term holders the monthly sales data has little consequence, and it is worth noting that although June was down from a year ago it is still the second-best June on record.

AMMO appears more focused on trying to meet growing demand by opening and modernizing facilities in Wisconsin, Georgia, and Arizona, and monetizing its recent acquisition of marketplace Gunbroker.com. The company even after the weekly decline is still not cheap, valued by the market at nearly $950 million, but there is little about the monthly FBI numbers that is likely to alter the long-term bull case for the shares.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.