What Are The Reasons Behind Dougherty’s GoPro Inc (GPRO) Upgrade?

Many analysts believe that GoPro Inc (NASDAQ:GPRO) stock has hit the floor and the stock cannot go beneath this. But, many other are still reluctant to place their bet on GoPro Inc (NASDAQ:GPRO) stock. Meanwhile, Charlie Anderson, Dougherty & Co’s Senior Analyst has upgraded GoPro Inc (NASDAQ:GPRO) stock from ‘Neutral’ rating to a ‘Buy’ rating and raised his price target on the stock to $55. Anderson talked on CNBC about the reasons behind his upgrade and shared his outlook for the camera maker.

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Why did Dougherty & Co’s Anderson come up with the upgrade for GoPro Inc (NASDAQ:GPRO) at this moment? Anderson pointed out that his firm has maintained the ‘Neutral’ rating on GoPro Inc (NASDAQ:GPRO) stock since last August. Note that GoPro Inc (NASDAQ:GPRO) stock has hit its all-time high above $90 in September.

Anderson said that they were waiting for GoPro Inc (NASDAQ:GPRO)’s valuation to become reasonable. He pointed out that the stock was trading at very high multiples, 40 – 50 times earnings. He feels that around 20 – 30 times earnings is a reasonable multiple for GoPro Inc (NASDAQ:GPRO). He said that as of today GoPro Inc (NASDAQ:GPRO) is trading at 25 times earnings.

“[…] Numbers have also gone up. We have been able to raise our estimate. We don’t feel like we are being overly aggressive at all in the model and I also feel like it’s a situation where you are set up well for potentially any new products as well. I would say all the models out there don’t really have revenue from any new products and I think this is the company that is likely to extend into other categories over time. So I think you have abilities to go up in estimates as well over time,” Anderson said.

 Lockup expiration is no longer considered as a headwind for GoPro Inc (NASDAQ:GPRO). The only possible headwind for them is the competition, either from an outsider like Xiaomi with cheap cameras or from domestic market like Apple Inc. (NASDAQ:AAPL) with better products.

Anderson said that he is not foreseeing any domestic competition for GoPro Inc (NASDAQ:GPRO)’s action cameras. He feels that companies like Sony has tried their hand in action cameras and failed in the past. But he feels that Xiaomi’s action camera can be considered as kind of a threat, since Xiaomi’s camera cost only $65 when compared to GoPro Inc (NASDAQ:GPRO)’s camera which costs around $200.

He feels that Xiaomi’s cameras might educate the Chinese market about action cameras, which might help GoPro Inc (NASDAQ:GPRO) in pushing their cameras into the luxury camera sector in Chinese markets.

Disclosure: None

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