Stifel Impressed With GoPro Since IPO, But Doesn't See Upside Potential For Buy

In a report published Wednesday, Stifel analyst Jim Duffy initiated coverage of GoPro Inc GPRO with a Hold rating. The analyst believes that the stock does not have sufficient upside potential to justify a Buy rating.

The company's reported strong Q2 results, with the revenue and EPS ahead of the estimates and the consensus. GoPro also issued its Q3 guidance ahead of expectations. The analyst believes that the revenue upside in Q2 was driven by higher EMEA and APAC revenues, partially offset by lower than expected revenue from the Americas.

See Also: GoPro Beats Q2 Expectations

The company also saw a more than 93 percent year-on-year increase in the number of capture devices sold during the quarter, driven by a widening distribution footprint, new product launches and continuing demand for the HERO4 Silver and Black.

According to the Stifel report, "2Q outperformance was led by international out-growth suggesting global demand for the GoPro brand is strong and perhaps accelerating helped by regional content and marketing efforts."

The analyst believes that the upside to the Q3 guidance was aided by the sell-in of the new HERO +LCD and HERO4 Session products. GoPro's inventories have also increase 172 percent, year-on-year, based on the Q3 revenue growth guidance of 56 percent, year-on-year.

"The shift in timing of product releases from the historical October launches to 2Q/3Q in combination with aggressive R&D spend begs speculation of additional product releases for Holiday. Absent this, we see 4Q as a difficult compare against the HERO4 launch a year prior," Duffy stated, however.

The analyst believes that the growth expected in Q3 would be driven by GoPro's international distributor business, although the decelerating growth trend in the Americas is likely to continue. This means that in the absence of an announcement of a new product to boost the Q4 performance, the stock could see some near-term pressure.