GoPro Could Face Negative Order Revisions Heading Into 2016, Cleveland Research Warns

• Shares of GoPro Inc GPRO lost nearly 5 percent on Thursday following several scathing reports from Wall Street analysts.
• Ben Bollin of Cleveland Research commented in a note that GoPro is likely facing order cuts heading into the end of the year while 2016 will prove to be a more challenging environment.
• Bollin suggested that a fair value for GoPro's stock is in the $15 range.

Morgan Stanley's Katy Huberty said recent channel checks reveal "little change in absolute inventory levels entering Thanksgiving weekend." The analyst noted the checks confirm her belief that various retailers will "try to reduce" weeks of inventory during the holiday shopping season.

Meanwhile, Piper Jaffray's Erinn Murphy suggested that GoPro's elevated inventory level will result in the company falling short of its margin expectations as selective price reductions are "becoming more evident."

Related Link: Channel Check Alert: GoPro Holiday Sales Not Looking Good

Cleveland Research: Order Cuts, Challenging Demand

In a report published Thursday, Ben Bollin of Cleveland Research noted that his discussions with contacts throughout GoPro's supply chain revealed further cuts to forward orders in November. The analyst continues to hear "soft demand" for GoPro's Session camera along with "incremental share loss." Meanwhile, contacts in Europe hinted that an "elevated inventory" of Hero 4 Session cameras is "see as a bigger risk" to the company's fourth quarter results.

Bollin continued that GoPro may have benefited from a brief momentum in sales due to Black Friday promotions. However, sales may have "dissipated quickly" as the promotions came to end and the company's partners were left "feeling price may be the key driver to sales momentum" in the future.

Bollin added that his contacts are indicating GoPro will face increased pricing pressure as competing devices, especially at the low-priced end, feature "richer feature sets." As such, the company faces a "more challenging" demand environment heading into next year.

"We see risk to 4Q and FY16," Bollin concluded. "Action camera industry fundamentals remain challenging, with more discussions highlighting the potential for a negative mix shift in 2016, and limited growth opportunity."

Shares remain Neutral rated with a "fair value in the $15 range."