Wall Street feasted on GoPro Inc GPRO this week when the company revealed abysmal fourth-quarter numbers. The stock was down nearly 10 percent Thursday morning, as analysts offered their takes on management's plan to restart growth by expanding into drones and video editing.
Some thought GoPro's brand strength could help it succeed in a wider market, but many had reservations about management's assessment of GoPro's expansion potential.
GoPro Could Be A ‘Category Creator’
Analysts from Cowen and Sterne Agee expressed with some hesitance that GoPro could rebound in 2017 after making changes in 2016.
Cowen analyst Robert Stone lowered his price target from $11.00 to $10.00, expected a $0.73 loss per share in 2016 and estimated that 2016 sales would come to $1.38 billion versus a previous estimate of $1.64 billion.
"We believe GPRO is a category creator," Stone wrote. He believes the company has the potential to expand from the action-camera niche into the consumer camera market, but uncertainty about its 2016 growth will continue to hurt the stock until the company can demonstrate a turnaround.
Sterne Agee analyst Rob Cihra thinks GoPro can capitalize on consumers' desire to post video on social media, but offered some stern fiscal forecasts. He cut 2016 EPS from $0.80 a share to a loss of $0.81, and revised his revenue estimate for the year from $1.75 billion to $1.37 billion. However, Cihra expects a recovery in 2017, concluding, "We believe that as long as there are people who want to shoot unique video to post on social media, there’s a ripe market for GPRO's unique products."
Some Wary Of New Product Line
Morgan Stanley was cautious about the impact of GoPro's new cameras and drone. Analyst James Faucette lowered his price target to $9.00 and offered a 2016 loss per share of $0.78. Faucette expressed slight optimism, writing that if the company can expand its "traction beyond a niche audience, we could turn more positive on GoPro."
Raymond James analyst Tavis McCourt pulled no punches, calling GoPro's strategy coming into 2016 "risky" and the launch of a drone and new camera "'make or break' products."
McCourt cut the firm's price target nearly in half, from $30.00 to $16.00. The firm lowered its 2016 EPS estimate from $0.80 a share to a loss of $0.67. The analyst noted that GoPro revenue could reach $2 billion in 2017 if the new product launches go well.
This is a "‘bet big or go home’ strategy that will play out over the next two years," McCourt wrote. "There remains meaningful downside if new hardware and software products don’t return the company to meaningful growth."
Dougherty analyst Charles Anderson thinks GoPro is trying to "spend their way out of the problem," noting that the company will dump about half of its revenue into operating expenses in 2016 as it prepares the new product launches. He did not place much confidence in the strategy, noting, "We cannot find another example of a consumer electronics company of this size that successfully deployed this strategy."
Anderson cut the 2016 EPS estimate from $0.44 a share to a loss of $1.09 and expected revenue of $1.3 billion instead of the previous $1.5 billion estimate.
Mobile: Opportunity Or Obstacle?
Oppenheimer analyst Andrew Uerkwitz thinks GoPro faces a mass market that might be unwilling to swap smartphones for GoPro cameras. He estimated a 2016 loss per share of $0.90 and revenue of $1.3 billion, down from a $1.6 billion previous estimate.
Uerkwitz thinks GoPro needs to capitalize on the mobile consumer to turn itself around. He concluded "management has not fully understood that its cameras will not provide the seamless capture experience it strives for until it focuses on mobile for the mass market."
Northland analyst Gus Richard was pessimistic on the new products' abilityto revive GoPro, writing that the company was "late to the market" in the drone game. He also noted that GoPro for Desktop doesn't incorporate cloud or mobile elements and might not do much to enhance adoption rates. Richard expects a loss per share of $0.75 in 2016 and $1.2 billion in revenue, down from the previous estimate of $1.4 billion.
Shares of GoPro dropped below $10 Thursday afternoon, sitting at $9.89 at time of writing.
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