GoPro shares rallied 1.64% to $43.40 in mid-morning trading after Dougherty & Co analysts upgraded the stock from Neutral to Buy. The research firm said GoPro stock had reached an “attractive entry point.” Describing it as “one of the most valuable brands in consumer technology,” Dougherty advised investors to get into the stock.
GoPro will actually benefit from Xiaomi’s Yi Action Camera
Dougherty said GoPro is trading at only 20x 2017 EPS estimate. The research firm has a $55 price objective, reflecting 25% upside from the current levels. Dougherty’s estimate doesn’t include any new product categories, which may provide further upside to the stock. The analysts said international expansion will be key to GoPro’s growth.
Some have expressed concerns about the San Mateo-based company’s expansion ambitions after Chinese smartphone maker Xiaomi launched its $64 Yi Action Camera. Xiaomi may pose a serious threat to GoPro. But Dougherty analysts believe that Yi Action Camera could actually benefit GoPro’s Hero line. Xiaomi’s product will stimulate demand in the world’s most populous country, warming the market up for the “best of the breed.”
Last week, two research firms, FBN Securities and Robert W. Baird & Co, issued bullish notes on GoPro. FBN Securities analyst Shebly Seyrafi described the company as a “category killer.” Baird said GoPro’s strong brand and distribution network would benefit the company. Baird analyst William Power said the action camera market is still expanding and the company has a significant lead over the competition.
Barclays sees little upside for GoPro stock
However, Barclays analysts Joseph Wolf and Brian Finneran said in a research note on March 26 that GoPro stock had little room for upside. Barclays trimmed its price target from $55 to $47, while reiterating the Equal-weight rating. Barclays also reduced its FY2015 EPS estimate from $1.45 to $1.42, and FY2016 estimate from $2 to $1.87 a share. Barclays said its current price target can be supported by only the hardware business.
Further, Wolf and Finneran said that the biggest problem with GoPro was the seasonality of the business. About 40% of the company’s total sales come in the fourth quarter, which may create a timing problem.
