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GoPro Inc. (GPRO) Hits All-time Low; Analysts Lower Estimates

By Howard Kim 

Shares of GoPro Inc. (NASDAQ:GPRO) have been declining over the past few weeks. On Thursday, the company’s stock hit an all-time low of $27.52. Oppenheimer and Cleveland Research weighed in.

On October 9th, Andrew Uerkwitz from Oppenheimer maintained a Perform rating on GoPro’s stock, while acknowledging he views the picture for the rest of the year as unclear.

Uerkwitz says the company’s Average Selling Price (ASP) trend is unfavorable, noting, “We believe GPRO’s ASP peaked in 2014, a year earlier than we expected. This is due to an early discount on Hero4 Session, and the lack of flagship model refresh. We expect a round of discounts to Hero4 Black and Silver into the holiday season, which puts further pressure on ASP.”

However the analyst points to one positive factor in GoPro, referring to the higher number of retail outlets this year. He comments, “On the brighter side, GoPro has a much stronger retail presence with broader geographic coverage heading into this holiday season. Its total retail outlets grew from 25,000 to over 40,000 in a year. We believe 2H15 sell-through data points from those new stores are critical to make calls for 2016.”

Uerkwitz has lowered his revenues and EPS estimates. He noted, “We lower our 4Q15 and 2016 revenues/EPS estimates from $723M/$0.91 and $2,175/$1.83 to $687M/$0.69 and $1,984M/$1.39. The cuts in 4Q15 was attributed to weaker expected performance in North America. Our 2016 estimate changes assume no quad-copter revenues, continued decline in the core camera market, higher opex, and minimum media content monetization.” GoPro is expected to launch a quadcopter next year.

Finally, Uerkwitz believes consensus estimates for 2016 are overly optimistic. In this context he says, “Recent revisions only reflects near-term product cycle issue at GPRO, but our estimate reflect an irreversible structural decline in the camera market. This holiday season will go a long way in determining who is right.”

As per TipRanks’ statistics, Uerkwitz has rated GoPro 10 times with a success rating of 67%. He has given an average return on the stock of 11.8% when measured over a one-year horizon and no benchmark.

On the same day, Benjamin Bollin from Cleveland Research downgraded GoPro’s stock to Neutral and set a price target of $29.33.Just like Uerkwiz, Bollin reduced his estimates for 4Q15 and full fiscal 2016.

According to Bollin’s supply chain checks, camera shipments during the September-ended quarter were considerably behind expectations; also shipments have continued to drop throughout October and the outlook for future also appears bleak.

In the third quarter, Bollin estimates GoPro will post unit sales of 1.6 million. The reduced estimate is attributed to the slower-than-expected ramp of Hero 4 Session cameras, as well as slowing demand for action cameras in Europe and China. For FY15, Bollin expects unit sales of 6.5 million units, as opposed to 7.5 to 8 million units. For FY16, he expects unit sales of 7.5 million units, down from the earlier estimates of 9 to 10 million units.

According to TipRanks, of the 17 analysts who have rated GoPro in the last 3 months, 13 have rated it as a Buy and 4 have rated it as Hold; none of the analysts have given it a Sell rating. The average consensus price target for GoPro is $67.57, an upside of 132.36% over current levels.