In a research report issued September 28 Sterne Agee analysts Rob Cihra and Edison Yu initiated coverage on shares of GoPro Inc(NASDAQ:GPRO) with a buy rating and price target of $45 which represents a potential upside of 50% from where the stock is currently trading.
Cihra and Yu noted ”Pulling this together, we disagree with one of the GPRO bear cases from day 1, namely that other consumer electronics companies like Sony, Samsung, etc., and cheaper-still Chinese copies, will simply commoditize GPRO’s premium positioning. Like customers who didn’t want an mp3 player but only wanted an iPod, so too do we think consumers don’t want a wearable camera, they want a GoPro. This said, a big lesson learned there was the iPod differentiated not just on brand and hardware but mostly, we believe, on superior iOS Software/User Interface and then the iTunes Ecosystem. Cameras don’t really lend themselves that far in either but we believe it is nevertheless critical for GPRO to keep trying to build out whatever competitive moat it can in value-added software and associated network effects.”
According to the report ”We initiate GoPro (GPRO) at Buy with our $45 price target equivalent to a P/E of 21x on 2016E. Founded in 2004 and based in San Mateo, CA, GPRO pioneered the “action camera” and its name is synonymous with the market. We don’t think consumers just want an action camera, they want a “GoPro.” And while started as a way for extreme athletes to film themselves, GoPros are seeing adoption by a wider market of consumers wanting to make unique content to share on social media.
Less likely to be eaten by phones – History is littered with one-function products/companies that ultimately just get consumed into smartphones (e.g., digital cameras, mp3 players, Palm, Flip), and the iPhone 6s and Galaxy S6 now shoot 4K video, but we see GPRO’s unique defense being it’s expressly designed for situations/environments where users wouldn’t want to risk wrecking their phone.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rob Cihra has a total average return of 14.8% and a 62% success rate. Cihra is ranked #343 out of 3,787 analysts.