GoPro's International Story Is 'Kicking In,' Barclays Notes

In a report published Wednesday, Barclays analyst Joseph Wolf commented that it is "hard to find much fault" in

's first quarter print as units shipped rose 58 percent year over year, driving a revenue beat. Wolf continued that GoPro's gross margin of 45.2 percent was better than his estimate of 44.5 percent as HERO4 sales accounted for more than 50 percent of total on a unit and dollar basis. Moreover, revenues, margin and earnings per share guidance for the second quarter was also higher than the analyst's expectations by a "significant" margin that will translate to a "sharp" uptick in shares that is expected to hold throughout Wednesday's trading session. Wolf noted that international sales accounted for more than half of the first quarter's revenues while EMEA and APAC regions experienced a 66 percent year-over-year growth. The analyst added that international sales could provide a "significant" opportunity for the foreseeable future and support management's view of a much larger total addressable market. The analyst singled out China, noting that the country represents a large opportunity now that its products are available for purchase. There has been investor concern that Xiaomi's action camera and GoPro competitor would gain traction given its cheaper pricing but the analyst stated that there appears to have been no impact or pricing pressure from the competing product. Finally, GoPro also announced the acquisition of Kolor, virtual reality and spherical media start-up. Go Pro has already become the "de facto" standard for people capturing spherical content, according to management while the analyst believes the acquisition is a "logical product extension." Bottom line, despite a positive quarter and optimistic outlook, the analyst admitted he remains "somewhat uncomfortable" with the consumer electronics nature of the story (supported by just hardware) as monetizing media is still not a focus of management. Shares remain Equal Weight rated with a price target raised to $50 (roughly 25x 2016 earnings per share estimate of $1.99) from a previous $47.