GoPro shares fell 2.16% to $27.36 in early trading Wednesday after two Wall Street firms lowered their price targets on Tuesday. GoPro stock has declined more than 50% in the last three months, and now it is trading slightly above the company’s IPO price of $24. Piper Jaffray analyst Erinn Murphy said the research firm would step to the sidelines until the stock price stabilizes.
GoPro’s demand is softening
Murphy expects near-term volatility in the stock to prevail. The GoPro brand and its ability to engage consumers cannot be questioned. But Piper Jaffray believes that the softening consumer demand and recent price reductions could eat into its gross margins. What’s more, GoPro’s popularity on Amazon has been declining since last year. Murphy also pointed out that some recent data points are encouraging, such as a survey that showed an increase in GoPro ownership among teens and their families
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Piper Jaffray has downgraded GoPro’s rating from Overweight to Neutral and slashed the price objective from $54 to $25. Murphy forecasts GoPro’s Q4 earnings to come in at 81 cents per share, lower than the Wall Street consensus estimate of 84 cents in EPS. She has also trimmed the FY2016 EPS estimate from $1.92 to $1.64.
Dougherty maintains a ‘Buy’ rating due to GoPro’s attractive valuation
Dougherty & Company analyst Charles Anderson also reduced his price target from $70 to $32. Anderson reiterated his Buy rating on the stock due to GoPro’s attractive current valuation. Dougherty said GoPro still has plenty of room to innovate, but near-term risks forced the research firm to lower the bar. Indicators such as Google searches and app downloads suggest that GoPro’s popularity is losing steam.
The San Mateo-based action camera maker is gearing up to launch an aerial drone in the first half of 2016, which should act as a buffer to declining camera sales. Dougherty believes GoPro has an opportunity to transform the drone market. The research firm estimates that the action camera maker will capture 5% of the drone market in 2016 and 10% in 2017.