On the heels of 30th semi-annual Teen Survey, Piper Jaffray analyst Erinn Murphy weighed in today on the action camera giant GoPro Inc (NASDAQ:GPRO) and sporting apparel giant Under Armour Inc (NYSE:UA), with downgrades.
In a research report released Tuesday, Murphy downgraded shares of GoPro from an Outperform to a Neutral rating and reduced the price target to $25 (from $54), following negative Teen Survey and further exploration on the brand positioning in the channel.
Murphy noted, “While we are encouraged with the continued adoption of the GoPro brand among teens, our wish list analysis highlighted more tepid holiday demand for the brand. Our survey results suggest a decline among teens that indicated a GoPro as one of their top two holiday gift wishes. More specifically, 1.0% of teens indicated a GoPro as one of their top-two gift wish, which is down from 1.6% in the Spring and 1.3% last Fall. We believe we are nearing a tipping point with respect to demand. It is important to remember the survey responses are completely unaided. We ask teens to list their top two gift wishes for the holiday.”
The analyst concluded, “While we believe in the GoPro brand and its ability to engage consumers through the stickiness of its content, we see near-term risk tied to the following: i) consumer demand softening (signaled by Teen Survey); ii) recent pricing reductions that could cause gross margins to normalize (LT plan: 42-44%); and iii) weakening trends in GoPro index on Amazon. Our below-consensus Q4 revenue and EPS are unchanged and our FY16 EPS moves from $1.92 to $1.64.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Erinn Murphy has a total average return of -4.1% and a 37.9% success rate. Murphy has a -44.1% average return when recommending GPRO, and is ranked #3482 out of 3775 analysts.
Out of the 20 analysts polled by TipRanks, 13 rate GoPro stock a Buy, 6 rate the stock a Hold and 1 recommends a Sell. With a return potential of 135%, the stock’s consensus target price stands at $65.69.
Under Armour Inc
Murphy also downgraded shares of Under Armour from Overweight to Neutral, while keeping the price target at $113, which represents a potential upside of 11.5% from where the stock is currently trading.
Murphy wrote, “To be clear, we still strongly believe in the longer-term opportunity for UA and see footwear and international as two of the most compelling growth catalysts. That said, we believe shares could “pause” near term as the stock digests a confluence of factors including current expectations, the recently announced COO/CFO transition at the same time the company is entering into a period of heightened investment. As it relates to our Teen Survey, we were pleased by the ongoing traction seen by UA as an upper-income male footwear preference (No. 9 vs. No. 12 six months ago). Within women’s athletics, UA ceded share to LULU and NKE.”
“Expectations into Q3’s print (10/22) are elevated on the heels of the recent Analyst Day where the longer-term sales CAGR of 25% was unveiled. We believe shares are pricing in sales growth at least of high-20% (vs. our 24% rate). While we believe this is possible, we believe significant upside in the stock will be somewhat contained as the Street awaits further details on the CFO transition,” the analyst continued.
According to TipRanks, analyst Erinn Murphy has a 23.1% average return when recommending UA.
Out of the 21 analysts polled by TipRanks, 14 rate Under Armour stock a Buy, while 7 rate the stock a Hold. With a return potential of 1.5%, the stock’s consensus target price stands at $102.60.