GoPro Can Recover In 2016, Says Sterne Agee CRT

• Shares of GoPro Inc (NASDAQ: GPRO) have declined 53 percent year-to-date, with a 38 percent decline in the past month.
• Rob Cihra at Sterne Agee CRT initiated GoPro with a Buy rating and a $45 price target, a 50 percent upside from current price.
• Cihra said that while video on phones is improving, GoPro is "expressly designed for situations and environments where users wouldn't want to risk wrecking their phone."

Sterne Agee CRT's Rob Cihra disputed the idea that GoPro's market and brand would be "eaten" by phones and low-cost competitors as he initiated coverage. Cihra said that GoPro's name is "synonymous with the market," and that consumers don't just want an action camera – "they want a ‘GoPro.'" That theory underlies his Buy rating and $45 price target.

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Further, Cihra argued that GoPro is addressing large trends in consumer tech. Notably, those include wearables, user-generated content for social media, consumer drones and virtual reality. The biggest driver of growth would be in the user-generated content category, where GoPro's "unique cameras are able to capture unique content."

Cihra hinted that the stock's volatility may not be passed it, cautioning that GoPro will need to "keep proving" that it is not a "fad that is easily commoditized." Further, the company risks falling into an "unproven, niche" market, though Cihra suggested that he is seeing adoption by a "wider market of consumers."

Despite that, the analyst values the company at 21x expected 2016 P/E multiple. While sales may take a "real pause" in the second half of 2015, Cihra said that 2016 should turn into a "strong new product year," with the expected launch of a consumer drone and a new HERO5. That should help lead to 24 percent year-over-year revenue growth.

In pre-market trading, GoPro was indicated 1.5 percent higher to $30.10.