Enough's Enough: This Analyst Believes The GoPro Sell-Off Is Overdone

It’s been a long time since GoPro Inc GPRO investors had reason for optimism. However, more than three years after its 2014 IPO and after a 90 percent decline from its all-time high, Longbow Research analyst Joe Wittine believes the bottom is finally in for GoPro.

Longbow upgraded GoPro to Buy and says the sell-off that occurred over the past few years got a bit overdone. According to Wittine, GoPro has the potential to top consensus earnings expectations in 2018.

Wittine on Wednesday wrote that the product-launch sell-off that GoPro investors have come to expect serves as a buying opportunity this time around. The stock is down 16.3 percent in the past month following the launch of the HERO6.

“Short-term, the stock can squeeze on quarterly beats, with 25% of GPRO's float short, and long-term upside is possible through ongoing operational improvements, product innovation (Fusion, KARMA 2), and continued momentum internationally,” Wittine wrote.

Longbow’s initial channel checks on the HERO6 suggest demand for the device is “good enough” heading into the critical holiday shopping season. Wittine expects an 8 percent decline in camera unit demand over the next four quarters, but said declining demand will be more than offset by a 16 percent increase in average sales price.

Those higher ASPs, wider gross margins, and careful management of channel inventory could help drive meaningful earnings beats for GoPro in coming quarters, Wittine said. After pushing $30 million in sales from Q4 to Q1 2018, Longbow is now calling for $1.50 billion in 2018 sales from GoPro.

In addition to the Buy rating, the firm has a $13 price target for GoPro stock.

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