What goes up, must come down. At least that’s the case with GoPro (GPRO) stock.
Shares of the action-camera company skyrocketed out of the gate, rising as high as 73% between January and May. But today is the opposite story, with the stock plummeting over 40% since May. The company’s recent earnings — released last week — forced shares down 13%, to its lowest point since January.
With the recent drop in GoPro's stock price, 3-star Wedbush analyst Michael Pachter is maintaining his Neutral rating and lowering his price target by $0.50, to $5.50. (To watch Pachter's track record, click here)
GoPro’s second quarter report showed that revenue and profit increased since last year, but missed estimates. While analysts were expecting revenue of $302 million, the company came about $10 million short, with EPS missing by a penny. The company did raise guidance, but lack of specifics didn’t bode well with investors.
Overall, Pachter says that GoPros’s second quarter results were “underwhelming.” The analyst thinks the company’s “turnaround to profitability is well underway in 2019,” but is still “reluctant to recommend shares ahead of GoPro’s next upgrade cycle this fall.” Pachter wants to see management "demonstrate that GoPro is a growth company,” before he makes a move.
With the guidance raise, many are expecting GoPro to launch new products, including Pachter. The analyst expects this year’s new fall lineup to include one entry-level low-priced model with an innovative high-end upgrade piece, as well as a new spherical camera. But to the delight of the analyst, GoPro is not releasing a drone. Pachter believes that GoPro is “well-positioned to re-enter” the drone market, but thinks it is wise to stay out of it right now.
One of the biggest factors on investors minds is profit. GoPro has shown two consecutive quarters, which has contributed to an improved “investor perception of management’s ability to drive the company back to profitability.” But Pachter thinks the big question is whether or not management can lead “sustainable growth,” with its products and subscription offerings. Amid the question marks, Pachter is lowering his 2019 estimates for revenue and profit.
All in all, GoPro has been here before. Last year, shares also plummeted 43%, between November and December, before ultimately climbing out of its hole and rising to one of the highest levels in recent years. TipRanks analysis of four analysts shows that the optimism isn’t dead (it just isn’t alive, either). Analysts are offering a consensus "Hold" rating on shares of GoPro, with one analyst suggesting Buy, two recommending Hold and one advises Sell. The average price target among these analysts stands at $6.88, which represents ~56% upside from current levels. (See GPRO’s price targets and analyst ratings on TipRanks)