GoPro Inc (GPRO) Price Targets Increased, Stock Soars

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GoPro Inc (GPRO) Price Targets Increased, Stock Soars

GoPro Inc (NASDAQ:GPRO) handily beat Wall Street’s earnings estimates last week, and now analysts are hiking up their price targets for the company’s stock en masse. In a pair of reports dated Oct. 31, 2014, Wedbush and JPMorgan analysts both upped their targets based on last week’s earnings report and management’s comments on the earnings call.

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GoPro’s “heroic” performance

In their report, Wedbush analysts Michael Pachter, Nick McKay and Alicia Reese bumped their price target for GoPro up from $81 to $98 per share and maintained their Outperform rating on the stock. They called the company’s earnings report “heroic.” Higher camera volumes and higher-than-expected revenues from direct sales and the Americas drove the company’s revenue beat.

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The camera maker reported that it had shipped “several hundred thousand units” of its newest cameras. Management said they saw better-than-expected demand and sell-through for the HERO4 Black camera. GoPro also beat expectations for earnings, coming in at 12 cents, compared to the consensus estimate of 8 cents. Reductions within the company’s supply chain drove a better-than-expected gross margin, which in turn drove the earnings beat.

GoPro’s margins look sustainable

On the earnings call, GoPro Inc (NASDAQ:GPRO) management said they don’t expect mix shift problems toward the least expensive HERO camera to affect gross margins in the fourth quarter. Instead, they continue to expect that the HERO4 Black and Silver cameras will continue to perform strongly. They guided for a gross margin of between 43.5% and 44.5%.

In their report, JPMorgan analysts Paul Coster, Paul Chung and Mark Strouse raised their price target for GoPro from $56 to $66 per share and maintained their Neutral rating on the stock. They believe management on the topic of gross margins. GoPro’s long-term target is between 42% and 44%, which they say is very sustainable in the long term because of the company’s “strong leadership position” in both the self-capture media and action camera industries.

GoPro could beat again

GoPro Inc (NASDAQ:GPRO) also provided strong fourth quarter guidance of between 65 cents and 69 cents in earnings and between $550 million and $580 million in revenue. The JPMorgan’s team previous estimate was 49 cents per share in earnings and $500 million in revenue.

They note that previously, GoPro’s international channel was rather under-supplied at the beginning of the current quarter. However, management expects to catch up with demand in the first quarter of next year. As a result, they think it’s possible that GoPro Inc (NASDAQ:GPRO) could beat estimates again in its next earnings report.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at Mjones@valuewalk.com.
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