Citi: GoPro's 'Low-End HERO Is Gaining Traction'

After GoPro Inc (NASDAQ: GPRO) reported “Apple-Esque” results but not-so-strong guidance, Citi research analysts Jeremy David and Ehud Gelblum trimmed their price target (from $59 to $48) and 2015 and 2016 EPS estimates. The analysts maintain a Neutral rating on the stock, which is down more than 10 percent at $48.69.

Related Link: Here's Why Wedbush Lowered GoPro's Price Target

Regarding the most recent financial results, the analysts pointed out: “In many ways, Q4’14 was too good, leading the company to post full-year GM and op margin at or above its LT target, setting a high-water mark and making future EPS growth more difficult.” Moreover, the analysts highlight that the revenue guidance provided for the first quarter of 2015 was “a bit soft” compared to their expectations, and attribute much of the softness to “a step-up in R&D investments. In addition, the resignation of COO Richardson came as a surprise, and could weigh on the shares.”

David and Gelblum then go into the HERO subject. “While not readily apparent in the Q4 results, we [the analysts] believe the low-end HERO is gaining traction,” they assure. “In the LT, we believe ASPs have to come down for the action cam market to go mainstream; nevertheless, lower ASPs may not be incompatible with healthy GMs.”

The firm maintained its Q1’15 revenue estimate of $346 million (down 45 percent quarter-over-quarter) and its GM estimate of 44 percent. However, increased its opex by $13 million to $115 million, bringing down its Q1’15 PF EPS estimate from $0.23 to $0.17. Moreover, the higher opex led the firm to lower its 2015 and 2016 PF EPS estimates by $0.12 and $0.13, respectively, to $1.21 and $1.45.