Some Wall Streeters Unwilling To Give Up On GoPro

Supply concerns resulted in GoPro Inc GPRO delivering a Q3 miss and reducing its FY 2016 guidance. The new HERO5 cameras and Karma drone have “compelling feature sets and superior branding,” and should become popular as supply constraints ease, Wedbush’s Nick McKay said in a report.

McKay maintains an Outperform rating on the company, while reducing the price target from $17.50 to $12.

GoPro reported Q3 revenue of $241 million, missing the consensus expectation of $319 million. EPS came in at $(0.60), short of the Street’s $(0.35). GoPro reduced its FY 2016 revenue guidance from $1,350–$1,500 million to $1,250–$1,300 million.

Constrained By Supply, Not Demand

“The Q3 underperformance and cut to full guidance were attributable to production issues that resulted in lower-than-expected launch quantities for HERO5 Black and Karma, meaning that both continue to be supply-constrained,” McKay wrote. He added that despite being at full production for HERO5 Black, GoPro expects to struggle to meet forecast demand through Q4.

Demand for GoPro’s new products “appears to be brisk,” the analyst commented, adding that the supply issues reflect pent-up demand. Although GoPro may miss out on some holiday sales this year, there are “enough GoPro enthusiasts to support robust sell-through of the cameras and drone for several quarters once retail availability improves.”

In a separate report, BlueFin's John Donovan termed GoPro’s Q3 results as “frightening” and its Q4 guidance as “cataclysmic.”