Piper's Murphy: GoPro Has 34% Downside

• GoPro Inc GPRO shares have plunged 82.14 percent over the past six months, to a low of $10.57 on January 28.
• Piper Jaffray’s Erinn E. Murphy has maintained an Underweight rating on the company, while lowering the price target from $0.00 to $7.50.
• The company has preannounced its Q4 results below the consensus. Murphy expects GoPro to provide its 1Q guidance and an update on channel dynamics when it reports its results on February 3.

Analyst Erinn Murphy mentioned that the Q4 revenue has significantly missed expectations, as well as the lower end of the guidance by $65 million.

According to the Piper Jaffray report, “During the quarter, GoPro faced soft sell-through on their HERO 4 and worked to reduce inventory of the Session following two price revisions.”

GoPro had announced a layoff of 7 percent of its current employee base of more than 1,500. “While the layoffs should alleviate some expense pressure, the company remains committed to investing behind the brand--both on the R&D side and the marketing side,” Murphy said.

While the Piper Jaffray estimate for Q1 sales is below the consensus forecast, the EPS estimate has been lowered form $0.10 to breakeven, as compared to the consensus of loss per share of ($0.05).

If sales continued to be “tepid,” Murphy believes that GoPro would need to right size its expense structure, although it is likely to continue with its share buybacks.

Murphy expects the company to launch its Karma quadcopter in 1HCY16, with a new line of action cameras being launched in 2HCY16.

The FY16 EPS estimate has been lowered from $0.60 to $0.50.