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Bank of America Merrill Lynch Rated GoPro a ‘Buy’

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Sep. 19 2016, Published 12:15 p.m. ET

Price movement

GoPro (GPRO) has a market cap of $2.0 billion. It rose 5.7% to close at $14.96 per share on September 16, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 16.4%, -2.9%, and -16.9%, respectively, on the same day.

GPRO is trading 4.4% above its 20-day moving average, 11.7% above its 50-day moving average, and 16.3% above its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Small Value ETF (JKL) invests 0.20% of its holdings in GoPro. The ETF tracks a market-cap-weighted index of US small-cap value stocks. The index stocks from the 90th to the 97th percentile of the market-cap spectrum, using fundamental factors. The YTD price movement of JKL was 11.2% on September 16.

The market caps of GoPro’s competitors are as follows:

  • Canon (CAJ): $37.7 billion
  • Sony (SNE): $40.6 billion
  • Best Buy (BBY): $12.0 billion

GoPro’s rating

Bank of America Merrill Lynch has initiated coverage of GoPro with a “buy” rating and set the stock’s price target at $19 per share.

Performance in 2Q16

GoPro reported 2Q16 revenue of $220.8 million, a fall of 47.4% compared to $419.9 million in 2Q15. The company’s gross profit margin fell 9.0% in 2Q16 compared to the same period last year.

Its net income and EPS (earnings per share) fell to -$91.8 million and -$0.66, respectively, in 2Q16, compared to $35.0 million and $0.24, respectively, in 2Q15. It reported adjusted earnings before interest, tax, depreciation, and amortization and adjusted EPS of -$76.8 million and -$0.52, respectively, in 2Q16. That compares to $75.3 million and $0.35, respectively, in 2Q15.

GoPro’s cash and cash equivalents and inventory fell 41.5% and 52.2%, respectively, in 2Q16 compared to 4Q15. Its current ratio fell to 2.1x, and its DE (debt-to-equity) ratio rose to 0.45x in 2Q16 compared to a current ratio and DE ratio of 2.8x and 0.43x, respectively, in 4Q15.

The company expects revenue of $1.4 billion–$1.5 billion for fiscal 2016.

Next, we’ll take a look at Under Armour (UA).

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