Here’s Why Piper Jaffray Analyst Flashes Caution Light on GoPro Inc (GPRO)

Piper Jaffray analyst Erinn Murphy offers bearish insight on GoPro Inc (NASDAQ:GPRO) after the action camera giant’s performance this holiday season did less than impress. In light of the Karma drone’s indefinite recall and production standstill from November 3rd onward, when the management team first issued guidance for the fourth-quarter, the analyst finds it difficult to be optimistic.

While Karma drone’s issues remain unidentified, without light at the end of the tunnel for GPRO, the analyst has reduced projections for the fourth-quarter and reiterates an Underweight rating on shares of GPRO with an $8 price target, which implies a close to 13% downside from where the stock is currently trading.

Another negative peg in GPRO’s path, the company announced as of November 30th of entertainment division-focused office closures and lay-offs, which do not bode positively. Moreover, the company released an 8-K December 20th announcing of the board’s approval for additional severance coupled with further costs that circle $7 million, with total restructuring charges now reaching $33 million.

Murphy notes a downward spiral of profitability, highlighting, “Our weekly Amazon tracking indicates the average pricing basket of GoPro products has seen a sequential quarterly decline from $282 in Q3 to $265 in Q4.”

For reference, the analyst adds that last year, the company pre-announced in the beginning of the new year.

Regarding the decline, the analyst underscores, “In reviewing our weekly Amazon rank and price analysis we note that the number of devices making a more recent presence on the top 100 list include the HERO and the HERO5 Black. The HERO4 Silver had historically made the list, but has not ranked for the past 5 weeks. The return of the HERO, a legacy product, appears to be directly correlated to a price contraction but we were under the impression this item was already end-of-life.”

To put it simply, “This Holiday season has not gone as planned from our perspective,” Murphy concludes.

With reservations on the stock’s prospects, the analyst has reigned in fourth-quarter revenue expectations, cutting from $515 million to $546 million, more pessimistic than the Street’s projection calling for $604 million. Additionally, the analyst has tweaked back her sales forecast for the financial year of 2017 from $1.31 billion to $1.26 billion.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Erinn Murphy is ranked #4,186 out of 4,290 analysts. Murphy has a 33% success rate and faces a loss of 9.3% in her yearly returns. However, when recommending GPRO, Murphy gains 2.1% in average profits on the stock.

TipRanks analytics exhibit GPRO as a Hold. Out of 13 analysts polled by TipRanks in the last 3 months, 1 is bullish on GoPro stock, 9 remain sidelined, and 3 are bearish on the stock. With a return potential of 6%, the stock’s consensus target price stands at $9.75.

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