Experts 'Cautious' On GoPro Heading Into Holidays, See Stock Going Lower

• GoPro Inc (NASDAQ: GPRO) shares are down 69 percent year-to-date, declining steeply after touching a high of $64.74 on August 10.
• Piper Jaffray’s Erinn E. Murphy maintained an Underweight rating on the company, while reducing the price target from $20 to $15.
• Channel checks suggest further price pressure, which would impact gross margins in Q4, Murphy mentioned.

Analyst Erinn Murphy mentioned that GoPro’s inventory was up 147 percent at the end of 3Q15. The company has guided to a 13-21 percent y/y decline in 4Q sales.

Over the past week, there has been increased price pressure on Amazon, while GoPro products have been popping up on a number of flash sales sites like Zulily, Groupon, and RueLaLa. The average price discounting is around 16-34 percent on action cameras and bundled kits.

Related Link: One Year Ago, GoPro Traded At 4x Its Current Price; What Happened?

Pricing on Amazon’s GoPro Session was reduced from $399 to $299 in September. Over the past weeks, there has been a decline in prices for the HERO 3 White and HERO 3+ Silver. GoPro’s projected gross margin of 45.5-46.5 percent for Q4 may come under pressure.

“We estimate every 50 bps in gross margin equates to ~$0.01 in Q4 EPS and $0.05 in FY16,” Murphy said. The EPS estimate for Q4 is at $0.34, below the Street consensus of $0.41. The EPS estimate for FY16 has been reduced from $1.35 to $1.03.

The retail landscape is coping with lackluster demand and elevated inventory levels. “We are becoming increasingly concerned the company will face a difficult time maintaining current margin expectations as selective price reductions are becoming more evident,” Murphy wrote.