Goldman Sachs: GoPro's Valuation Hinges On Drones, Content Monetization

In a report published Monday, Goldman Sachs analyst Simona Jankowski initiated coverage of

with a Neutral rating and a price target of $60. GoPro is expected to sustain its leading position in the action cameras segment, driven by its aggressive content media strategy. "We do not share the bear view that GoPro's business will commoditize, as its strong content engagement (e.g., 3.5mn subscribers on YouTube) has created a powerful consumer brand that supports margins/ market share and can drive incremental content monetization," analyst Simona Jankowski mentioned. "…we expect it to maintain a three-plus year sales/EPS CAGR at the 20%-plus level, aided by its expansion into drones. However, we view that opportunity as largely reflected in the stock's multiple," Jankowski added. The successful launch of a video cloud platform and its monetization through advertising, licensing or direct sales may enable the company to perform ahead of the Goldman Sachs estimates. In the report Goldman Sachs noted that GoPro's revenue growth is expected to decelerate in 2015/2016 due to the action cameras segment reaching saturation. Revenue growth could reaccelerate as the company ramps into consumer drones or quadcopters. GoPro is expected to post revenue growth of 36 percent in 2015, down from 41 percent in 2014. The company's revenue growth for 2016 and 2017 is projected at 21 percent and 28 percent, respectively.