How GoPro Gets To $60

• GoPro Inc GPRO shares have lost 50 percent year-to-date, and are trading close to the lower end of their 52-week range of $30.55 - $98.47
• Cowen and Company’s Robert W. Stone maintained an Outperform rating for the company, while reducing the price target from $76 to $60.
• While GoPro’s shares already reflect AMBA’s cautious commentary and a slower start for the HERO4 Session, Stone believes that the concerns over competition appear overblown.

With GoPro’s multiples contracting since August, analyst Robert Stone said, "Cautious commentary by supplier AMBA (NR) and a slower-than-expected start for the HERO4 Session now look well discounted." Stone believes that competitive concerns are “overblown,” with GoPro taking the top-spots on both BestBuy and Amazon.

Citing the company as a category leader, the analyst wrote, “…the top-5 best-sellers on BestBuy.com are: HERO4 Silver ($399), HERO HD ($129), HERO4 Black ($499), HERO + LCD ($299) and HERO4 Session ($399), followed by two Sony models at $269 and $319. The top 6 on Amazon are: HERO HD, followed by Silver, Black, HERO3+ Silver (an older model), Session, and Hero+ LCD.”

Stone believes that Apple entering the action cameras market is quite unlikely because this is not a “big enough opportunity to matter to a company that size.”

Noting that investors are concerned about holiday sales, Stone said that inventory has been built up. A new, user-friendly video editing platform could have a “larger and longer-lasting impact” than releasing a new camera model this year.

The Cowen and Company report stated, “We believe GPRO can strengthen investor confidence and the competitive position if it continues to execute on: new software and services, content and licensing, and the H1:16 drone launch.”

The DCF discount rate has been raised from 11 percent to 12 percent, “reflecting a more unsettled market and global macro backdrop,” Stone commented, which yields the new price target of $60.