Oppenheimer's Uerkwitz: GoPro Inc Management Is Misunderstanding This Key Strategy Necessity

GoPro Inc GPRO shares are having a bad Thursday, under the $10 mark after the company missed earnings and revenue expectations while drastically reducing guidance. In a new research note, Oppenheimer's Andrew Uerkwitz warned company management could be "too optimistic" about the size of its addressable market.

Uerkwitz holds a Perform rating on GoPro without a price target. The analyst lowered his 2016 top and bottom line estimates significantly, and introduced 2017 revenue and EPS expectations of $1.4 billion and -$0.73, respectively. Before the conference call, the analyst had previously expected GoPro to notch positive earnings of $0.51 per share this year; he had not yet issued 2017 figures.

In particular, Uerkwitz discussed GoPro's total addressable market (TAM). "We never doubt GoPro's market share leadership in the action camera, or even in standalone camcorder categories. However, market share is a poor metric, masking GoPro's real problem, that fewer standalone cameras are sold each year and mass market consumers will never choose GoPro cameras over smartphones as the go-to solution to capture life moments," he wrote. In other words, a big piece of a small pie isn't good for anyone.

Related Link: http://www.benzinga.com/trading-ideas/long-ideas/16/02/6205584/has-gopro-reached-rock-bottom-yet

Oppenheimer also warned against expecting too much from GoPro's desktop solution and its VR products. Uerkwitz doesn't think either will be "meaningful" for at least this year, and said that "PC
software has marginal impact on a user base which increasingly values better mobile experience."

It's worth noting that Uerkwitz doesn't hold a Sell-equivalent rating on the stock. The analyst said he thinks GoPro is "making the right changes to regain growth," adding that drone and software bets are "crucial." The missing piece, though, might be a mobile friendly product, a problem Uerkwitz noted management doesn't "fully" understand.

GoPro shares last traded near $9.79 as of this writing.