Morgan Stanley Is Waiting On GoPro To Development Some New Software

• GoPro Inc GPRO shares have plummeted 83 percent since August 4.
• Morgan Stanley’s James E Faucette maintained an Underweight rating for the company, with a price target of $12.
• Software developments and a meaningful improvement in GoPro’s editing and sharing platform will bode well for the company, Faucette stated.

After preannouncing lower-than-guided 4Q revenues, GoPro has now projected continued channel reduction activity in 1Q. The company plans to discontinue most of its entry level HERO cameras, analyst James Faucette mentioned.

“Combined with continued expectations for Y/Y declines in sell-through, management's Q1 revenue guidance of $160mm-$180mm fell significantly short of our original estimate of $255mm,” Faucette wrote.

Although the company intends to launch several new software and hardware products in the near future, it may find it difficult to expand the addressable market, the analyst noted.

“We look forward to software developments as we continue to believe improving usability is key to driving mass market appeal, but we are cautious on anticipating TAM expansion as we have been disappointed on GoPro's progress to date,” the Morgan Stanley report stated.

Faucette believes that a meaningful improvement in the company’s editing and sharing platform and “traction beyond a niche audience” will be positive for GoPro’s hardware cycle. He further pointed out that higher R&D and sales and marketing spend are expected to result in a continued increase in the company’s operating expenditure in 2016.