GoPro Inc (NASDAQ:GPRO) shares gained more than 5% in early trading session after Wedbush analyst Michael Pachter initiated coverage of the stock with an Outperform rating and $81 price target. Just a few days ago, Oppenheimer Andrew Uerkwitz assigned the stock an Underperform rating and $55 price target. Uerkwitz said that the company’s growth would decline over the next two years.
GoPro a ‘driving force’ in the camcorder market
Wedbush analyst Pachter said GoPro is the “unquestioned leader and driving force” in the action camcorder market. The company sold well over 3.8 million HD camera last year. According to NPD Group, the San Mateo-based company was the top-selling camcorder in 2013. Its Hero cameras accounted for 45% of the total camcorder sales in the U.S in 2013, up from just 11% in 2011.
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The research firm said investors underestimate the company’s nascent and rapidly growing addressable market. Its recently announced budget camera Hero is expected to expand the total addressable market. The entry-level Hero has been priced at $129, and has compelling features to drive demand. It comes with 5MP camera, 1080p and 720p video resolutions, Auto Low Light, SuperView, QuikCapture and waterproof casing.
Wedbush says GoPro has differentiated itself from the competition through branding and outstanding functionality. The company has entered into several partnerships with celebrities, athletes and entertainers that cater to its core audience. Further, its push into media should strengthen its brand power. GoPro can command premium pricing, thanks to its strong brand.
GoPro is conservative in its guidance
GoPro is expected to release its third-quarter results on Thursday, Oct.30. Wedbush expects the company to report $268 million in revenue and $0.10 in EPS, compared to the Wall Street consensus of $263 million in sales and $0.08 in earnings per share. GoPro has guided Q3 revenue of $255-$265 million and EPS between $0.06-$0.08. Pachter said the company management will be conservative in its guidance in the first few quarters as a publicly-listed company to build credibility.
The research firm values GoPro at 70x its FY2015 EPS estimate of $1.15 plus cash. That’s a very high multiple, but Wedbush says it’s “justified” considering other technology companies such as Facebook, Twitter and Netflix are trading above 75x out-year consensus estimates.
GoPro shares rose 5.04% to $68.18 at 10:11 AM EDT on Tuesday.