Cleveland Research: GoPro Undervalued in Near-Term by 20 Percent

Analysts at Cleveland Research said that they believe GoPro Inc GPRO is substantially undervalued, placing a "near term" price target of $55 to $60 on the $45 stock. Over the long term, Cleveland said it expects "opportunities from new products and potentially services," including a drone and a product refresh at the end of 2015.

The analysts base this on five key points, but all of which point to the fact that Cleveland Research said it is bullish on the total addressable market and GoPro's earnings power, which the analysts believe will eclipse $3 in the next several years.

With the upcoming earnings report, Cleveland Research said that Q1 demand "appears in line," with the analysts modeling 1.36 million units – 60 percent growth year-over-year. Next quarter, Cleveland said that "demand [is] trending flat to down" quarter-over-quarter. For the year, the analysts forecasted 7 million units.

Late this year or early 2016, Cleveland said it expects GoPro to introduce a drone. GoPro's development should offer easy use, increased durability and improved recording capabilities over competitors.

On competitors, Cleveland does not expect Xiaomi to offer much competition for GoPro's higher-end models. "GoPro's brand strategy is effective, with retailers indicating that consumers almost exclusively ask for GoPro when looking for an action camera," the note said.

GoPro is down 29 percent year-to-date, though the price has risen 44 percent since the July IPO. The stock recently traded 2.2 percent higher to $45.30.