GoPro Inc was one of the top performers on Tuesday’s early stock market. The cause for the firm’s massive rise in value on Tuesday appears to be a new report on the firm from Barclays analyst Joseph Wolf. Mr. Wolf applauded the firm’s “focus on content” and said that recent moves in the space gave the firm’s stock plenty of upside.
Mr. Wolf raised his price target on GoPro from $55 to $65 and bumped his rating on the firm from Equal-Weight to Overweight. He said that “Since the IPO the company’s progress has reduced our concerns considerably.” The stock market appears to agree with him on Tuesday morning.
GoPro flies on content outlook
The future at GoPro will bring content into the mix in a huge way says Mr. Wolf, “Recent hires of Zander Lurie and Charlotte Koh highlight a focus on content that when combined with a GPRO portal and better editing and production tools could produce an interesting avenue for brand extension for GPRO.”
GoPro , like many other hardware makers, builds things that many firms could build at a lower price. Its brand might protect it from some of the losses, but traders are pricing a large margin into the firm’s future and hearty competition could eat into that.
Content is key to making GoPro hardware stand out from the crowd. It’s a lesson that the firm was warned to learn from Apple when it first went public, and it’s one that the firm’s leaders have kept reminding traders it cares about at every turn.
Charlotte Koh, who recently joined the firm from Hulu, told Variety in a recent interview that she will be in charge of making deals for the term with Hollywood studios, and said that GoPro was planning to create scripted content in the future.
That’s an interesting break from the firm’s plans to create an extreme, video-based, social network but it’s one that Wall Street seems to be a fan of. For the time being, however, the firm sells hardware, and Mr. Wolf spent much of his report talking about that side of the business.
GoPro hardware is still winning
Content will be key for GoPro going forward says Mr. Wolf, though the firm’s hardware business is also stronger than he forecast in the past.
He wrote that while “the intro of the Hero4 and the compact Session solidify the hardware lead. New developments like 360 video, drones, better software, and a planned a portal should further expand the lead.”
The San Mateo-based firm will be expected to keep margins on hardware up even as it expands beyond the camera space. Wolf said that there were still some issues regarding product mix and gross margin at the firm, despite a concerted attempt to keep raising margins at the firm.
Content may help to keep those margins higher, but it is thought that the gross margin on the less expensive GoPro Session will be lower than that on the firm’s Hero 4 premium HD device.
At time of writing shares in GoPro were up by 6.27 percent on this morning’s market to $55.38. That’s the highest level shares have traded at since the end of June.
GoPro will release its earnings numbers for the three months through June on July 21 after the market closes in New York. The firm will show earnings of 25.7 cents per share for the period on sales of $395m says the mean estimate of Wall Street research houses looking at GoPro Inc.