GoPro Facing Pricing Pressure And Lower Holiday Demand, Warns Piper Jaffray

• GoPro Inc GPRO shares have been steadily declining in 2015 and are 58 percent below from their January 2 high of $66.87.
• Piper Jaffray’s Erinn E. Murphy downgraded the rating on the company from Overweight to Neutral, while reducing the price target from $54 to $25.
• The volatility in GoPro shares is expected to continue in view of softening consumer demand and contraction in prices, Murphy stated.

Analyst Erinn Murphy noted that GoPro’s shares have been “on a roller coaster since April with price action more than reversing from the up 46 percent gain through early August followed by a 56 percent correction.” Murphy expects the shares to remain volatile in the near-term.

GoPro’s strength lies in its strong brand and ability to engage customers through sticky content, but softening consumer demand and the recent pricing reductions and their impact on gross margins remain concern areas, Murphy mentioned.

The latest Teen Survey showed a deceleration in the holiday wish list activity for GoPro, the Piper Jaffray report mentioned, adding, “We believe we are starting to see the tipping point of demand in our survey and against a holiday with no new products likely on deck, prefer to sit on the sidelines.”

An analysis of GoPro rankings in the top-100 electronics category on Amazon.com, Inc. AMZN revealed signs of pricing pressure on the GoPro session, along with a decline in the number of products finding place in the top-100.

The EPS estimate for FY16 has been reduced from $1.92 to $1.64. GoPro is expected to record unit growth of 20 percent in 2016 with ASP estimated to contract by 10 percent.