Analysts are weighing in on action camera company GoPro Inc (NASDAQ:GPRO) and semiconductor company Ambarella Inc (NASDAQ:AMBA), following GoPro’s negative pre-announcement, which should weigh on Ambarella. Shares of both companies fell sharply today, reaching record lows.
Wedbush analyst Michael Pachter reiterated an Outperform rating on shares of GoPro, while slashing the price target to $18 (from $33), after the company pre-announced worse-than-expected preliminary Q4:15 results driven by weak sell-through for its capture devices. For 4Q15, the company now expects revenues of $435 million, 16.5% below consensus.
Pachter commented, “Q4 revenue is expected to be roughly $435 million, well below our prior estimate of $550 million, the guidance range of $500 – 550 million, and consensus of $512 million. Q4 revenue includes a $21 million reduction for price protection charges from the December HERO4 Session price cut. Q4 non-GAAP gross margin is expected to be 34.5 – 35.5%, below our prior estimate of 46.6% and 48.0% in Q4:14.”
Furthermore, “The HERO4 Session has been a problem since its launch in early July. Its starting price of $399.99 was cut to $299.99 in late September, and roughly one month later, GoPro announced worse-than-expected Q3 results and below consensus Q4 guidance attributed (at least in part) to weak HERO4 Session sellthrough. In early December, the price was cut further to $199, but the second price cut apparently didn’t stimulate sufficient to allow GoPro to approach Q4 top-line guidance. It also appears to have hurt gross margins, although we did note some discounting of other HERO4 capture devices in Q4 as retailers tried to improve sellthrough. Current Q4 guidance implies roughly break-even EPS or a loss.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Pachter has a yearly average return of -9.2% and a 34.5% success rate. Pachter has a -65.3% average return when recommending GPRO, and is ranked #3509 out of 3585 analysts.
Out of the 19 analysts polled by TipRanks, 8 rate GoPro Inc stock a Buy, 9 rate the stock a Hold and 2 recommend Sell. With a return potential of 46%, the stock’s consensus target price stands at $21.29.
In addition, Chardan Capital analyst Marc Estigarribia reiterated a Neutral rating on shares of Ambarella, with a price target of $90, which represents a potential upside of 102% from where the stock is currently trading.
Estigarribia observed, “As the market continues to slaughter GPRO, AMBA continues to correlate downward – Since yesterday’s close, GPRO has traded down >70% YoY and down ~20% since start of 2016. AMBA has been off 26% YoY and 20% YTD2016. Remember that AMBA sited weakness from its Wearables Sports segment (~30% from GPRO), as the inventory glut is worked through this 1H (maybe even longer?), and it lowered top line guidance to 15-20%. Expect the drag to continue until it provides visibility of a stabilization and/ or turn around for its Consumer segment.”
According to TipRanks.com, analyst Marc Estigarribia has a yearly average return of -13% and a 9% success rate. Estigarribia is ranked #3046 out of 3585 analysts.
As of this writing, out of the 10 analysts polled by TipRanks in the last 3 months, 6 rate Ambarella stock a Buy, while 4 rate the stock a Hold. With a return potential of nearly 84%, the stock’s consensus target price stands at $82.