B. Riley upgrades American Outdoor Brands to buy, says it can jump 40% from here

Shares of American Outdoor Brands could have more than 40% upside from here based on better-than-expected earnings next week , according to B. Riley Securities. Analyst Eric Wold upgraded shares of American Outdoor Brands to buy from neutral, and reiterated an $11 price target, saying low expectations are already built into the firearms stock. “This upgrade to Buy is not necessarily a view on the quarter (with our 1Q23 estimates below consensus estimates), but we could also have a ‘less bad than expected’ situation brewing–especially an expectation that ‘healthy’ retail inventory levels will drive normalized re-stocking patterns into the holiday season,” Wold wrote in a Tuesday note. The analyst previously downgraded the stock to neutral in June because of fears of lower consumer spending and inventory problems, and the concern that the company may not provide guidance for fiscal year 2023, according to the note. Still, the stock could have upside from here after cratering 61% in 2022, and falling 72% from its 52-week high. The analyst said he not only believes “the perceived risk inherent in our downgrade has now been priced into shares, but that the current valuation does not reflect the opportunity ahead with an elevated outdoor activity participant base and a brand portfolio that may be attractive to other entities.” Meanwhile, the analyst expects the company could become an acquisition target as it “could achieve greater profitability within another entity that has an even broader reach into the retail channel and with consumers directly.” The firm has an $11 price target on the stock, implying roughly 42% upside from Monday’s closing price of $7.77. American Outdoor Brands jumped nearly 3% in Tuesday premarket trading. –CNBC’s Michael Bloom contributed to this report.

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