Citi Upgrades GoPro In 30-Page Report

In a report published Friday, Citi analyst Jeremy David upgraded the rating on GoPro Inc GPRO from Neutral to Buy, while raising the price target from $63 to $90. Analyst Jeremy David pointed out that GoPro appeared poised to benefit from two mega trends - flying cameras and virtual reality. "We view the consumer drone/quadcopter opportunity as attractive-We estimate the flying camera TAM to be 10M units and $5-$10B in sales in 2020 – and believe GoPro could become a top-two player by leveraging its distribution channel (40,000 locations), installed base (we estimate at least 10M users), and brand," David said. In the report Citi noted that in case GoPro were to capture 50 percent of the 10M flying camera category without any impact on the core action camera business, its earning power would get a boost of ~$3.00. The EPS estimates for 2016 and 2017 have been raised by $0.13 to $2.27 and by $0.56 to $3.0, respectively. Referring to Virtual Reality, David mentioned that the revenue contribution from this segment had not been included in the Citi model and may be viewed as "potential upside." "While we have been concerned that US sell-through is decelerating, GoPro appears to have executed its product launches and distribution growth flawlessly and we expect more of the same going forward," the report said, while adding that the company was likely to perform in-line with the 4Q15 estimates.