The firm also raised its price target on shares of the Salt Lake City-based active outdoor equipment and apparel retailer to $6 from $4.50, saying that Black Diamond shares could outperform as its restructuring yields operating improvement.
Black Diamond has renewed its focus on core hardgoods categories and recently unveiled revamped products, including lighting, trekking poles, packs and rope line.
"Following a difficult on-shoring process that resulted in sub-optimal gross margins and a painful recall for inspection process on five products (which yielded minimal returns), we believe management's intense focus on this matter is generating results," Davidson continued in an analyst note. "Adequate production levels have resumed and improved product quality testing is now in place."
Davidson said it places zero value on any upcoming, potential acquisitions because the outcome remains mixed. A deal could create shareholder value or become a headache for investors, the firm added.
Black Diamond's revenue guidance has grown to be in the range of $145 million to $150 million for 2016, reflecting strong demand for the company's products, Davidson noted. With revenue stabilized, the firm said gross margin improvement can restore Black Diamond's profitability.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate BLACK DIAMOND INC as a Sell with a ratings score of D. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
You can view the full analysis from the report here: BDE