GoPro's Day of Drama Leaves Wall Street Debating Its Future
GoPro Inc. analysts and investors had their work cut out for them on Monday
(Bloomberg) -- GoPro Inc. analysts and investors had their work cut out for them Monday, as a quarterly revenue miss and job cuts were followed by reports that the wearable camera-maker has hired JPMorgan Chase & Co. to advise on a potential sale. The stock rallied from a 33 percent plunge to close down 13 percent. Hilliard Lyons analyst Stephen Turner said that GoPro “would better execute their business within a larger company,” while other firms noted the stagnation of the action camera market.
Still, JPMorgan’s GoPro analyst said that the company should return to profitability this year and that the stock does not reflect its “inherent earnings power.” GoPro, which said it has “not engaged” with JPMorgan to help sell the company at the moment, is down 6 percent in pre-market trading Tuesday.
Hilliard Lyons, Stephen Turner
(Neutral)
“We remain of the opinion that GoPro would better execute their business within a larger company.”
“Results have been inconsistent, management turnover has been high, debt is increasing, and our outlook lacks needed upside to recommend shares.”
Raymond James, Tavis McCourt
(Market perform)
“The bigger picture is that the action camera market appears to be in flattish to modest decline, while GoPro’s attempt at diversification into drones has failed.”
“The company will cut costs to return to some level of profitability in 2H18, but ultimately it needs to stabilize the revenue stream for the shares to improve from currently distressed levels.”
“Until the company can prove a return to sustainable profitability and growth, we believe the risk/reward is balanced at this valuation.”
Bloomberg Intelligence, Jitendra Waral
“Consumer demand for GoPro’s cameras is likely stagnant, with unit sell-through to buyers challenged since 2015. The company’s strategy, which includes improved video-editing-and-sharing software and a new 360-degree camera, are unlikely to be enough to reverse this trend.”
“GoPro’s failure to resuscitate end-market demand makes M&A a likely exit for the company amid a rudderless strategy in the stagnant action-camera market.”
JPMorgan, Paul Coster
(Overweight, PT $9 from $13)
“We believe a return to profitability is probable in 2018 owing to expense reductions and the stock does not properly reflect the inherent earnings power.”
Assuming continued improvement in execution, GoPro’s earnings should “inflect positive in 4Q17 and accelerate dramatically y/y in 2018-2019.”
Cowen, Robert Stone
(Market perform, PT $6 from $8.50)
The first quarter “will be impacted by another price cut and more restructuring charges, but 2018 will benefit from a lower expense run rate.”
Wedbush, Alicia Reese and Michael Pachter
(Neutral, PT $6 from $10.50)
“We are unwilling to recommend GoPro shares given generally poor execution in recent years, questions about the long-term demand for its cameras, and an unceremonious exit from the drone market, among other factors.”
“Pending takeover speculation, or product debuts that are both meaningfully differentiated from existing cameras and expand GoPro’s addressable market, we expect GoPro shares to remain range bound.”
To contact the reporters on this story: Jeran Wittenstein in San Francisco at jwittenstei1@bloomberg.net, Beth Mellor in London at bmellor@bloomberg.net.
To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Scott Schnipper
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