J.P. Morgan Thinks GoPro Investors Can Win From This

• Shares of GoPro Inc GPRO have fallen 50.15 percent over the past three months, touching a low of $27.60 on Oct 8.
• J.P. Morgan’s Paul Coster has maintained an Overweight rating on the company, with a price target of $75.
• Coster believes that concerns regarding a rapid decline in product sales growth are overdone, and that investors might be underestimating GoPro’s long term growth potential.

Analyst Paul Coster explained that the stock was down about 50 percent since GoPro announced its 2Q15 results, due to “weaker-than-expected sales of the Session, and no holiday-refresh for the flagship Black and Silver models.”

The stock is currently trading below that of its peers, despite the robust 3Q15 guidance of about 55 percent year on year growth, increase in margins, as well as future catalysts, such as the GoPro drone, which is expected to be launched in 1Q16, virtual reality apps being launched and increasing contribution of the company’s media initiatives.

Coster expects the company to reports its 3Q15 EPS and revenues ahead of the consensus and at the high end of the guidance range. Revenues are expected to have risen 59 percent year on year during the quarter, with a 51 percent increase in unit shipments.

Despite the price cut on Session late in 3Q, Coster believes that “the impact to margins in 4Q should be minimal given that the bill of materials is likely significantly less than the similarly-priced Silver.”

Coster also expects the revenues and PF EPS to come in ahead of the consensus in 4Q15. “The product line-up is in place for the holiday season, with the introduction of the Hero + at the beginning of October,” the report added.