Piper Jaffray Shows Continued Concern On GoPro, Warns Of 'Material Pricing Pressure' On HERO Models

December 20, 2015

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GoPro Inc (NASDAQ: GPRO) shares have lost 45 percent in the last three months, and are trading close to the lower end of their 52-week range of $15.90 – $69.75.
Piper Jaffray’s Erinn E. Murphy maintained an Underweight rating on the company, and a price target of $15.
The company could continue to clear inventory, at the cost of its margins, Murphy stated.

GoPro's blended pricing is around 20 percent below the September levels. The Amazon price and rank analysis indicates that GoPro continues to witness significant pricing pressure, not merely for the HERO Session, but also for other core models, analyst Erinn Murphy said.

While this has resulted in a modest increase in rankings, the company could still be clearing inventory, which would come at the cost of margin. “We have a downward bias on our Q4 EPS of $0.28 (Street: $0.33),” Murphy wrote.

GoPro’s profitability is likely to be under pressure on account of a number of reasons. During its latest quarterly earnings call, the company indicates that inventory was up 147 percent, and up 70 percent excluding new product, during the quarter. This compares with sales being up 43 percent y/y.

“We note management is working diligently to clear this inventory. In addition to price cuts on AMZN, we have also seen the HERO Session product cleared on several adjacent channels including QVC in recent weeks in which the company commented they sold 16k units in 36 hours,” the Piper Jaffray report stated.

Murphy added that there new product is likely in 2016, including an update to the HERO platform as well as a quadcopter. He added, however, that there is concern regarding the current inventory levels in the channel and “the lingering economic impacts of recent price reductions.”