GoPro Inc (GPRO) Is Impressing Andrew Uerkwitz with Execution and a Potential Path to Sustainable Growth

Oppenheimer: The capture market is looking better and GPRO just made a strong comeback with 3Q results.

GoPro Inc (NASDAQ:GPRO) shares are falling 3% today after having lost 10% in value yesterday, which leaves no mystery to the imagination that CEO Nicholas Woodman’s predictions for a standout third quarter may have been overly inflated. Investor sentiment was at a high approaching the third quarter print, meaning that even though the action camera maker yielded an outperformance, GPRO’s fourth quarter guide was not enough to satisfy steep hopes.

However, Oppenheimer analyst Andrew Uerkwitz believes “the forest matters more,” and approaches the tech player with optimism from the sidelines. As far as Uerkwitz is concerned, what matters most is “computer vision, ability to capture everything, and to quickly share.” When it comes to acuity, speed, and creativity, “GoPro has made great strides in all three with GP1, Fusion, and Quick,” cheers the analyst.

For the third quarter, GPRO brought in $329.8 million in revenues and $0.15 in EPS, outclassing consensus revenue expectations of $313.8 million and EPS of $0.02. However, though revenues saw a 37% annual surge and expenses were lessened by 31% year-over-year, “the Street cares about inventory,” explains Uerkwitz, noting that this segment fell to 9 weeks from 11 at the first quarter and is still anticipated to dip under more. Woodman set the stage for a “bit of softness” with the company’s Hero 5, but the analyst notes management is unfazed, expecting “traditional holiday promotions should drive demand.”

For 2018, management guides for around 40% in gross margin, with EPS and cash meaningfully improved from 2017, notes the analyst. However, while the analyst raises full year EPS forecasts for 2017, he “slightly” dials back on revenue for both this year as well as in 2018, noting that upside potential exists to his approximately 8% revenue expectations. Additionally, this year average selling prices already have seen a 22% boost with expectations to keep rising.

Uerkwitz takes the quarterly showcase in positive stride, concluding that his “bearish opinion of the capture market is starting to turn more positive,” with a potential light at the end of the tunnel with “sustainable” gains: “Put in context how strong this quarter was, just three months ago, consensus revenue was $278.5M for the September quarter. More importantly, if we step back and look at the full year, GoPro has executed well and surprised many along the way (including us, when management gave its double-digit revenue growth/nonGAAP positive net income guidance, our estimates were skeptical […]). And today, based on updated guidance, it will meet or exceed those goals. Our broader concerns of the capture industry remain, but we can see this industry potentially turning a corner as computer vision combined with 360 capture could be revolutionary. GoPro with Fusion is leading the way.”

For now, the analyst maintains a Perform rating on GPRO stock without listing a price target. (To watch Uerkwitz’s track record, click here)

Most are gravitating on a fine sidelined line when it comes to the action camera maker’s prospects in the capture industry, with TipRanks analytics demonstrating GPRO as a Hold. Based on 9 analysts polled by TipRanks in the last 3 months, 2 rate a Buy on GoPro stock, 5 maintain a Hold, while 2 issue a Sell on the stock. The 12-month average price target stands at $9.90, marking a nearly 7% upside from where the stock is currently trading.

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