GoPro Inc (GPRO) Has Over 33% Downside Potential: Piper Jaffray

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Analyst weighs in on GoPro stock after a fireside meet with CFO at Annual Consumer Conference

Erinn Murphy, analyst at Piper Jaffray offered commentary on GoPro Inc. (NASDAQ:GPRO) after having a fireside chat with its Chief Finance Officer, Brian McGee. The meeting took place at the 36th Annual Consumer Conference conducted by Piper Jaffray. The analyst did not make any changes to his Underweight rating on the stock and maintained a price target of $6.5, which reflects a 33.05% downside potential on GoPro stock.

The analyst noted that although the conference room had greater volume compared to last year’s room, the number of attendants was not up to the same level as it used to be in the past. GoPro CFO revealed during his talk with Mr. Murphy that the company, “will continue to work through inventory.” He further mentioned that by the end of second quarter, they anticipate the channel inventory to be down 35% which marks the lower end of the expected range of 35-50%. The company is more than expectedly inclined toward the sale of goods to retailers prior selling it to the public, said Mr. Murphy.

For each quarter, the action camera manufacturer continues to expect sequential improvements in gross margins from first quarter’s adjusted rate of 36%. Furthermore, upon being asked about capital allocation, the CFO revealed the company’s plan to continue investments in business in comparison to the repurchase of shares.

On the other hand, GoPro investors expect a strong recovery in the second half of the year as they anticipate great offerings from the company in the form of the upcoming Karma drone and the Hero 5 camera. Also, the GoPro supplier company, Ambarella executives indicated recently that they expect a turnaround in the action camera industry in the second half of this year.

Meanwhile, according to Thomson Reuters, the consensus 12-month price target for GoPro stock stands at $11.88. The figure reflects a 22.34% potential upside on the San Mateo based company’s stock, over the last close.

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