In a research report released this morning, Piper Jaffray analyst Erinn Murphy reiterated an Overweight rating on shares of GoPro Inc (NASDAQ:GPRO) and reduced the price target to $54 (from $72), in response to Ambarella Inc’s (NASDAQ:AMBA) third-quarter guidance, which bracketed expectations. Recall, Ambarella is a key supplier of video compression and image processing semiconductors for GoPro.
Murphy commented: “We are lowering our Q3 sales estimate from $442M to $431M (guidance $430-$455M). Recognizing that Q4 is up against a 75% Y/Y sales comparison and with the likelihood that there is no new product on the docket for Q4, we are now taking our Q4 sales estimate from $697M to $583Mwith a step function change from 10% Y/Y growth to a negative 8% Y/Y sales decline.”
“To be clear, we assume that sell-through rates on new products do not pick up meaningfully from the more tepid August numbers. Should that reverse, our estimates could prove conservative. Our FY15E EPS moves from $1.90 to $1.70 and our FY16E moves from $2.12 to $1.92. Of note, we have no estimates for quadcopters in our estimates. With a total drone market we estimate to be in the range of $1-2B this year (2015) and with DJI capturing 50%-plus marketshare, we make the assumption that if GoPro can capture 10-20% share. At a $2B market in 2016, this would equate to $200-$400M in sales which could be worth $0.20-$0.40/share not currently in our FY16 estimate (at 20% op margin),” the analyst continued.
Bottom line: “We believe it is prudent to lower our estimates given AMBA’s Q3 guide. For Q3, our GPRO sales estimate moves to the low-end of guidance and our Q4 sales est. is now down 8% Y/Y.”
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 1.1% and a 47.7% success rate. Murphy has an -16.8% average return when recommending GPRO, and is ranked #1683 out of 3742 analysts.
Out of the 16 analysts polled by TipRanks, 10 rate GoPro Inc stock a Buy, 5 rate the stock a Hold and 1 recommends Sell. With a return potential of 57%, the stock’s consensus target price stands at $68.46.