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Longbow Research Downgrades GoPro to ‘Underperform’

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Price movement

GoPro (GPRO) has a market cap of $1.3 billion and fell 3.0% to close at $9.07 per share on January 6, 2017. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 2.6%, -7.0%, and 4.1%, respectively, on the same day.

GPRO is now trading 1.0% above its 20-day moving average, 10.5% below its 50-day moving average, and 24.8% below its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Small Value ETF (JKL) invests 0.28% of its holdings in GoPro. The YTD price movement of JKL was 1.7% on January 6.

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

  • Canon-ADR (CAJ): $38.7 billion
  • Sony (SNE): $35.5 billion
  • Best Buy (BBY): $13.4 billion

GPRO’s rating and performance in 3Q16

On January 6, 2017, Longbow Research has downgraded GoPro’s rating to “underperform” from “neutral” and has set the stock’s price target at $7.0 per share. GoPro (GPRO) reported 3Q16 revenues of $240.6 million—a fall of 39.9%, as compared to revenues of $400.3 million in 3Q15. The company’s gross profit margin fell 630 basis points in 3Q16 compared to 3Q15.

Its net income and EPS (earnings per share) fell to -$104.1 million and -$0.74, respectively, in 3Q16 compared to $18.8 million and $0.13, respectively, in 3Q15. It reported adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and adjusted EPS of -$73.6 million and -$0.60, respectively, in 3Q16, as compared to $56.7 million and $0.25, respectively, in 3Q15.

GPRO’s cash and cash equivalents and inventory fell 52.9% and 22.8%, respectively, in 3Q16 compared to 4Q15.

Projections

GoPro (GPRO) made the following projections for 4Q16:

  • revenues: $600 million–$650 million
  • gross margin: 39%–41%
  • non-GAAP (generally accepted accounting principles) EPS: $0.25–$0.35
  • tax rate: 12%

The company projected revenues in the range of $1.25 billion–$1.30 billion for fiscal 2016.

GoPro (GPRO) made the following projections for fiscal 2017:

  • expected revenue growth in double digits
  • operating expense of ~$735 million
  • tax rate of ~15%

For an ongoing analysis of this sector, be sure to visit Market Realist’s Consumer Discretionary page.

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