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Pacific Crest Still Skeptical Of GoPro In The Long Run

While downside risk in GoPro Inc GPRO appears limited in the near term, there are concerns over how new products would fare against expectations in the long term, Pacific Crest’s Brad Erickson said in a report. He maintained a Sector Weight rating on the company.

The channel is now clear for new products and channel fill would commence in 3Q. With this, GoPro may achieve “a dramatic return” to y/y growth in 4Q, analyst Brad Erickson mentioned.

“That said, given the relatively tepid demand trends we continue to observe, based on our latest checks from mid-July, we believe the new camera would have to offer significantly greater utility or functionality to maintain growth into next year; thus, our below-Street estimates,” Erickson wrote.

Higher ASPs Boost Estimates

The overall estimates for 2016 and 2017 have been raised mostly to reflect higher ASPs. The analyst projected 160,000 drones contributing $90 million in revenue in 2016, and 375,000 and $203 million in 2017.

Remaining On The Sidelines

In the near term, there is little downside risk to numbers, with the drone launch effectively doubling GoPro’s TAM. “Longer term though, we’d need to see incremental camera functionality and/or strong drone traction before turning more positive on the name,” Erickson commented.

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DateFirmActionFromTo
Jun 2016Longbow ResearchInitiates Coverage onNeutral
Feb 2016Dougherty & CompanyDowngradesBuyNeutral
Feb 2016Sterne Agee CRTDowngradesBuyNeutral

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