"Word is that the category is still selling well through the early cycle and expectations are positive for Holiday,” a Detwiler Fenton analyst stated in a recent report on GoPro.
His theory was that the poor fourth-quarter guidance “is more a function of their ability to plan rather than a fundamental demand shift in the market.”
The expert explicated that what GoPro needs is to learn how to buy, as its overall growth curbs “with the law of bigger numbers.” He then went on to say that, in the firm’s view, the soft fourth-quarter guidance was driven by “a confluence of events.”
Soft Q4 Guidance Drivers
“After several revs of rolling new products each year to cause an upgrade cycle, this year was not a repeat,” he expounded. The introduction of the Session 4 (cube) midway in their Hero price scale “caused some consumer conflict and confusion. They bought too many because thinking it would sell like other new products had in the past, but it didn’t. Likely some channel stuffing disrupted normal market flows to correct.”
The analyst continued to highlight that “sell-out of retail channels is still quite strong for GPRO,” and Detwiler Fenton experts are hearing about sturdy re-orders.
“I think that the shift from selling into a product cycle versus managing stock around demand for items that are already in the market caught them off guard,” the expert concluded. “While the longer term concern is that pricing competition will hurt margins (typical consumer electronics stuff), we are not seeing any sign of this today. People are still paying up for the name brand.”
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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