DA Davidson Downgrades Clarus On Soft Industry Trends, Lower Macro Visibility

Clarus Corp (NASDAQ: CLAR) is facing headwinds in the ammunition industry, suggesting limited upside in the near term, according to DA Davidson.

The Analyst

DA Davidson’s Michael Kawamoto downgraded Clarus from Buy to Neutral while reducing the price target from $17 to $12.

The Thesis

Recent commentary from Clarus and the industry suggests the macro environment remains soft, while the bankruptcy filing by Ellett Brothers has led to lower visibility industry wide, Kawamoto said in the downgrade note.

Clarus indicated that while it was facing weakness mostly on the military side, the trend could carry over to the commercial side. Analyst Kawamoto expects the company to deliver another weak performance in the third quarter, given the tough comp and macro issues.

He added that there was lack of visibility into an improvement in the company’s performance in the fourth quarter.

Although there is good momentum in the Black Diamond segment, Clarus will need to achieve very strong execution for this segment to offset softness in the Sierra segment and meet the company’s growth guidance, the analyst said.

“We believe that product will remain compelling, and that the brand will be a market share gainer, but that there is little margin for error for the rest of the year,” Kawamoto wrote.

Price Action

Shares of Clarus were down 1.26% at $11.04 at time of publishing on Thursday.