Morgan Stanley lowered its rating on GoPro Inc. to “Underweight” from “Equal Weight.” The analysts, led by Yuuji Anderson, warned that GoPro could be in for a “long year ahead” given “limited earnings power” and weak demand for its new camera line.
Anderson wrote that the firm tracked poor channel checks for GoPro throughout the holidays but regardless continued to expect GoPro to be able to return to profitability and see steady improvements to camera usability. “Our assessment proved too generous when the company resorted to price cuts with the latest HERO6,” they claimed, and that led to Morgan Stanly to put its price target under review on January 8.
After pre-announcing negative Q4 results on January 8, GoPro’s stock recovered some ground on media reports that GoPro had hired an investment bank to advise on a potential sale.
“We have no knowledge of a potential transaction (and management stated that the company is not engaged in a sale), but we think the market is giving too much credit for the potential strategic value of the company given its current earnings power,” wrote Anderson. “Whether by itself or within another ecosystem, GoPro’s value is tied to its usability, and its earnings power remains at risk at the current pace of functional improvements.”
Morgan Stanley lowered its price target from $9.50 to $5.00. On Tuesday, shares of GoPro closed at $6.12, off 18 cents.
Photo courtesy GoPro
