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Why Oppenheimer Is Less Optimistic About GoPro

GoPro Inc. (NASDAQ: GPRO), known for its meteoric rise at this time last year, is getting a second look from analysts based on its new Hero4 camera. One key analyst gave a somewhat mixed view on this company.

While Oppenheimer likes the strides GoPro is making, the firm reiterated a Perform rating due to its more conservative view of the core capture device market. Much of the report was focused on the Hero4 camera and its launch.

Due to the Hero4’s different form factor and earlier launch, Oppenheimer believes it is too early to make a call on its success. Management also demonstrated the latest software update, which the firm believes is part of a larger vision to improve user experience. Sharing was much improved comparing to Oppenheimer’s earlier experience.

According to Oppenheimer:

We believe this product will be GoPro’s most prominent piece of new hardware for 2015, despite its early release in July. Hero4 Session features a much smaller, rugged body with longer battery life and streamlined user interface. Management indicated it can be a great everyday companion camera for users.

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However the company will be taking a slightly different route reaching out to consumers. Management will invest more in marketing, not only focusing on educating users of its new products, but also more aggressively reaching out to a broader demographic. The firm believes GoPro’s recent products are more family friendly and management confirmed that family/kids is the top theme of user captured content.

Management indicated that replacement is not yet a substantial market opportunity for GoPro. It would be more meaningful once GoPro’s device unit installed base reaches 40 million to 50 million. Currently, the company believes that its product is so underpenetrated that there are still plenty of new users to gain.

As a result, Oppenheimer lowered its full year 2015 and full year 2016 per-share earnings to $1.82 and $1.83 from $1.89 and $1.88, respectively. However, the revenue estimates remain unchanged. Separately, GoPro’s management noted that larger scale, better supply chain and channel management could generate upside to gross margin.

Oppenheimer gave its bottom line as follows:

While we like recent strategic initiatives (streamlined editing tools and new product categories: quad copters/AR/VR capture) and its leading position among prosumers, we remain sidelined due to our belief that the core products are seeing slowing growth in a shrinking capture market.

Shares of GoPro were up 2.9% at $34.56 Wednesday morning. The stock has a consensus analyst price target of $71.71 and a 52-week trading range of $31.32 to $98.47.

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By Chris Lange