Good news for action camera maker GoPro Inc (NASDAQ:GPRO) and bad news from social media company Twitter Inc (NYSE:TWTR) do not always translate to corresponding reactions from analysts. One analyst explains why a new partnership between GoPro and Red Bull is not enough to offset the company’s recent woes. Meanwhile, another analyst explains why a 52-week low for Twitter and possible monetization opportunities for newly purchased app Periscope represent a compelling entry point for shares.
Piper Jaffray analyst Erinn Murphy provided her insights on GoPro following an announced multi-year partnership with energy drink maker Red Bull. Red Bull will serve as the global exclusive partner for POV camera’s and content in exchange for 1% equity in GoPro, giving GoPro access to over 1,800 events in 100 countries. The two companies will share content and production rights which will be distributed among both Red Bull and GoPro’s digital networks.
Although the analyst acknowledges that the deal will provide GoPro with more worldwide exposure, she does not believe it is enough to save the struggling company. She explains, “While this extends the consumer impressions of the brand globally, we believe the GoPro still is battling some challenges with reinvigorating unit sales of its capture devices.” Such challenges include its delayed Karma drone launch to the holiday season, “tepid” demand for action cameras over the past few quarters, and soft guidance from Best Buy for Q2, where 15% of GoPro sales come from.
On a more positive note, the analyst believes Red Bull’s more stable YouTube view counts and subscribers will offset high y/y declines for GoPro’s channel and will be keeping a close eye on engagement in this platform. The analyst will also be watching for a Q&A session with GoPro CEO Nick Woodman on CNBC for details regarding the deal.
The analyst maintains an Underweight rating on the company with a $6.50 price target.
Is it worth listening to this analyst? Check Murphy’s historical performance and ranking here.
According to TipRanks, out of all the analysts who have rated the company in the past 3 months, 31% gave a Buy rating, 15% gave a Sell rating, and 54% remain on the sidelines. The average 12-month price target for the stock is $12.07, marking a 24% upside from current levels.
Axiom analyst Victor Anthony commented on Twitter after the company reached 52-week low levels of under $14 yesterday. The analyst states that now is a great time to invest in the company, believing shares have bottomed out and can only go up from here. He states, “With sentiment at all-time lows, and with an asymmetric risk-reward, investors should reconsider going long the stock at these levels.” Anthony notes that shares currently reflect investor concern over issues Twitter has been facing for some time now, including lack of user growth and engagement, low demand for brand advertising, and intensifying competition from the likes of Instagram and Snapchat.
Although performance has been “disappointing”, the analyst believes the company should bounce back after 3Q and into 2017 as it takes steps to increase monetization, improve its measurement tools, and launches its NFL streaming service. The analyst also points to upcoming popular events such as the Olympics, the U.S. election, and the Euro 2016 which he believes will “spur user growth”.
The analyst comments on Periscope, a live streaming video app that the company purchased last year. The analyst believes monetization opportunities for the app will not be reflected in shares for another 1.5 years at least. He believes the company must take a series of steps before successful monetization can take place. He explains that the app “would likely require greater investment, advertiser education and support, more engineering support, and deeper integration into Twitter.” Furthermore, in order for Periscope to look attractive to advertisers, the company must solve issues related to “user connections and the quality of content.”
While the analyst believes live-video represents an attractive medium to advertisers, it is too early to predict when this will start to ramp up. He explains, “Given that live video is in a nascent stage, it is difficult to frame the ad opportunity.” However, the analyst believes Periscope represents “a potential gold mine” for Twitter, encouraging investors to pay closer attention to its user engagement. He also notes a likelihood that Periscope will compete directly with Snapchat.
Anthony reduces his 2017 revenue and Adj. EBITDA by 15% and 30% respectively, in order to more accurately reflect current consensus estimates and to “give management an easier hurdle to clear.”
The analyst reiterates a Buy rating on shares and reduces his price target from $24 to $18.
Victor Anthony is ranked #110 out of 3,951 analysts on TipRanks. He has a 59% success rate recommending stocks with an average return of 10.7% per recommendation.
According to TipRanks, out of all the analysts who have rated the company in the past 3 months, 35% gave a Buy rating, 13% gave a Sell rating, and 52% remain on the sidelines. The average 12-month price target for the stock is $19.34, marking a 38% upside from where shares last closed.