Northland Capital initiates coverage of GoPro stock with an Outperform rating and $70 price objective

GoPro shares surged 12.48% on Tuesday to close at $50.92 as a lockup on 76 million shares held by early investors expired. The restrictions on insiders and employees were lifted on Tuesday, flooding the market with 76 million GoPro shares for the first time. GoPro spokesman Jeff Brown told Peter Burrows of Bloomberg that the company insiders and employees will be able to start selling the stock on Wednesday.

GoPro

GoPro’s lockup expiration an attractive entry point

Lockup expiration is one of the most feared events for a stock after its IPO. GoPro went public on June 26, 2014 at $24. Upon lockup expiration, stocks often decline as insiders look to cash in part of their holdings. However, Northland Capital Markets analyst Gus Richard said the lockup expiration was an “attractive entry point” for investors. Richard has initiated coverage of the stock with an Outperform rating and $70 price objective.

Northland Capital’s price target reflects a 40% upside from the current levels. Richard expects GoPro to keep growing, largely through digital video and use of its action cameras in helmets and drones. ValueWalk reported in November last year that the San Mateo-based company was working on consumer drones that could be launched later this year.

GoPro stock down 19% year-to-date

Richard said GoPro is an “extremely well-branded high growth consumer franchise.” Many other analysts have said that GoPro stock has already been hit by the February 17 lockup expiration. The stock has declined more than 19% this year so far, despite the company reporting strong holiday quarter sales.

GoPro stock had the previous lockup expiration in December, when many existing shareholders including founder Nick Woodman’s father were eligible to sell. In December, regulatory constraints on 36.6 million shares had expired. But some insiders had participated in a secondary offering in November and agreed to hold shares until February 17.

GoPro stock skyrocketed to $98 in October, but has dropped considerably since then due to anticipation of the lockup expiration and heavy short selling.