Piper Jaffray: GoPro Has 'Favorable' Risk-Reward, Reiterates Overweight Rating

In a report issued Thursday, Piper Jaffray analysts Erinn E. Murphy and Christof R. Fischer take a look at GoPro Inc GPRO as it approaches it second quarter report. On the belief that current risk/reward on the stock is favorable and the expectation of another "beat & raise" quarter, the firm reiterates an Overweight rating and $68.00 price target on the shares.

The stock has pulled back recently in reaction to a couple of events:

1) Fitbit Inc FIT’s IPO, which the analysts believe has “created some money rotation”

2) The recent initiation of a competitor at a Neutral on decelerating growth.

That said, Piper Jaffray does not believe that the GoPro growth thesis has changed, and remains confident on the company’s ability to beat expectations heading into next week’s second quarter earnings call.

Related Link: Top Wedbush Analyst: HERO4 Will Drive GoPro Earnings Beat

The analysts’ confidence is based on two recent discoveries:

1) The firm’s proprietary Amazon Relative Strength Index “supporting strong momentum across both legacy and new product has strengthened over the past months”

2) Ambarella Inc AMBA reported results ahead of expectations. According to the note, this suggests that second-quarter sales could come in in the $440 million to $450 million range (well above the firm’s $396 million estimate).

Analysts at Piper Jaffray model EPS of $1.72 on sales of $1.906 billion for 2015 and EPS of $2.00 on revenue of $2.367 billion for 2016.