GoPro Inc stock neared a near-six-month low Wednesday, following a grim outlook by one of the suppliers, who indicated that no new cameras will be released before the holidays. In the last three months, GoPro’s stock has lost 32% versus 8.7% for the S&P 500 Index.
Mixed reaction from analysts
On Tuesday, Ambarella, which produces chips for the action cameras, told analysts in a conference call that owing to the timing of GoPro and Xiaomi product launches, it expects its quarterly wearable-camera revenue to drop both from the last quarter and from the year ago quarter. As per FactSet, Ambarella is among the top suppliers for GoPro. In Morning trade on Wednesday, Ambarella’s shares dropped sharply by 14%.
Following the call, many analysts came out with the verdict on GoPro Inc , some of them are discussed below.
In a note to the clients, Stifel Nicolaus analyst Jim Duffy said the comments from the supplier “strongly” indicate that chances of a new GoPro camera on Ambarella chips by this year, is very unlikely. Duffy noted that GoPro has been well on execution, but investors expect a high growth from the stock. The analysts maintained a Hold on GoPro.
Though the drop in the stock price do make it attractive, but considering “execution risks and current expectation, at present there is insufficient upside potential to justify a buy rating,” the analyst noted.
In a note, Piper Jaffray’s Erinn Murphy said that Ambarella’s 3Q commentary indicate “very low” chances of HERO5 this year. Murphy took note of two vital points said during the call. First; revenue from flying camera could be higher than the 2Q; second, sales of the wearable camera could be lower year over year, and from last quarter.
Will GoPro go for a new supplier?
Travis McCourt of Raymond James lowered the price target on GoPro to $50, but maintained an Outperform rating. The analyst sees no clear proof of a weak demand, and believe the firms foray in the drone market could push the growth in 2016.
Travis does suggest that the firm could go for a new supplier, but accepted that it has not happened before. So, he says that it is very likely that the GoPro Hero4 Session, which was released in July, was the biggest launch from GoPro Inc in 2015.
Separately, JMP Securities Alex Gauna is bullish on GoPro as the firm reported a rise of 70% in the global brand awareness last quarter. GoPro is also investing in software, media, people, sponsorship, real-time live broadcast and virtual reality, putting it in “another league” when compared to the rivals, the analyst said.
At around 11 am EDT, GoPro shares were down 2.47% at $40.22 while Ambarella’s shares were down 4.68% at $78.14.