Shares of Smith & Wesson Holding Corp. slumped 3.4% in premarket trade Thursday, after the gun maker was downgraded at Wunderlich Securities, which cited signs of weakening consumer demand. Analyst Rommel Dionisio cut his rating to hold, after being at buy for at least the last two years, and slashed his stock price target to $29 from $36. Dionisio said after two sharp spikes in demand for guns, following the terrorism-related incidents in San Bernadino, Calif. and in Paris, federal background checks data has "decelerated meaningfully" in August and September, suggesting checks trends could turn negative in coming months. In addition, recent unseasonably warm weather has led to lower interest in hunting-related products, which should hurt Smith & Wesson's long gun business. As a result, Dionisio expects promotional activity to increase, which could cut into profit margins. The elimination from a military handgun contract is also a concern. The stock had run up 19% year to date through Wednesday, while the S&P 500 had gained 5.7%.
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