GoPro Stock: Analyzing the Upside Potential


Oct. 4 2018, Updated 7:30 a.m. ET

Stock trading at an eight-month high

In this series, we have seen how GoPro (GPRO) stock has gained close to 13% in the past week. Is the gain a momentary spike in the share price or has GoPro stock bottomed out? GoPro has burned considerable investor wealth and has fallen more than 90% since its all-time high of $90.36 in October 2014.

So, investors will be wary about entering the stock at the current levels. Analysts have a 12-month average target price estimate of $6.58 for GoPro, which is almost 10% lower than the current price.

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New product launches

We have seen that GoPro is banking on new product launches to drive its sales in 2018. Earlier this year, the company launched several products across price points to target various customer segments.

However, the launches caused the company’s gross margin to decrease. GoPro’s gross margin fell from 42.4% in the second quarter of 2016 to 36.2% in the second quarter of 2017 and 30.8% in the second quarter of 2018.

GoPro expects to achieve non-GAAP profitability in the second half of 2018. We have also seen that the company expects the gross margins to expand to 40% in the fourth quarter. GoPro continued to experience solid demand for the HERO6 Black and HERO5 Black cameras in the second quarter.

While the HERO6 Black camera accounted for 75% of the camera revenues, the HERO5 Black accounted for 60% of unit shipments in the second quarter. GoPro’s CFO, Brian McGee, said, “Due to the demand of HERO6 Black and HERO5 Black cameras, our second quarter street ASP was $264, nearly flat sequentially proving that our $199 HERO camera did not lead to cannibalization of our high end cameras.”

GoPro stock might fall

If GoPro misses analysts’ projections, the stock could fall. While GoPro remains the best-selling action camera in the United States, the popularity must translate into incremental sales for the company.

GoPro is estimated to experience revenue growth of over 4% in fiscal 2019. Analysts expect the company to be non-GAAP profitable in 2019—still below the company’s sales of $1.62 billion in 2015.

Currently, GoPro is focused on its short-term execution.


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