GoPro Inc: Is GPRO Stock Back on Top?

 gopro stockGPRO Stock Is Surging

Following a ringing endorsement of its drone business from an analyst, GoPro Inc (NASDAQ:GPRO) is on the rise, with GPRO stock up almost eight percent as of late-morning trading on Tuesday.

Pacific Crest Securities analyst Brad Erickson raised estimates for GPRO stock’s drone shipments up to 150,000, which will result in a revenue contribution of $88.0 million for FY2017, according to his projections. (Source: “GoPro (GPRO) Drone Shipment Estimates Raised At Pacific Crest,” StreetInsider, January 24, 2017.)

Erickson couched the good news with the bad, saying that there will likely be losses and burned cash in 2017, but he believes that GoPro management could hedge against these negative outcomes by further reducing the company’s workforce. Here’s part of Erickson’s statement below that led to the recent surge in GPRO stock:

In light of better-than-feared sell-through, we are raising our unit estimates by a bit more than 10% to 2.1 million units in Q4 from 1.9 million and are raising our ASP estimate slightly as our store checks showed an impressive ability to pivot point-of-purchase displays to selling the Karma Grip ($300 electronic stabilizer) when it became clear the Karma would not be launched. Further, we are removing Karma from our Q4 estimates and now expect volume shipments to begin in 2Q17.

(Source: Ibid.)

As if that wasn’t good enough news for GoPro, Erickson had some positive light to shine on GPRO stock’s holiday season. He said that “[o]ur checks indicate that GoPro exited the quarter with a healthy 7–8 days of inventory at Best Buy in the United States with sell-through having sustained periods of significant growth through the quarter.” (Source: Ibid.)

He was also quick to temper the good tidings, however, mentioning that one successful quarter does not prove a trend. GPRO stock’s previous quarters were rather dismal, with sell-through of 40%–50% below ship-in.

Still, this is good news for a company in dire need of some. In 2016, GPRO stock fell by over 52%, which is a poor showing for a company that some investors are concerned has maxed out its consumer base. With the introduction of drones and other devices beyond GoPro’s staple of cameras, some were hopeful that the company would be able to stage a rally. While by no means a sure thing, Tuesday’s estimate increase and the subsequent stock jump are still welcome news for GPRO stock enthusiasts.

Whether these good tidings are an aberration or a signal of an upcoming rally for the stock, we’ll be keeping a close eye on GoPro stock.