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Summary

  • JMP initiated coverage with an outperform rating and a bold $60 price target.
  • Although it provides a short-term boost, up over 10% on Tuesday, the negative thesis is still intact.
  • My previous article alluded to the buzz in the market being the main driving force of this company in the short term.

Tuesday morning, JMP initiated coverage of GoPro (NASDAQ:GPRO) with an outperform rating and a $60 price target. The positive call is based on GoPro achieving $2 billion in revenue and $1.70 in EPS by just 2016. Further, their analysts believe its media business, on Youtube and other media outlets, will provide a boost to revenue. This forecast values GoPro at 19.5x its 2016 EPS. This outlook is egregiously optimistic and doesn't take into account the numerous risks GoPro faces.

The influence of the media creating volatility in this company is evident. Before JMP's coverage, on Monday, GoPro fell 5% after Barron's disseminated a negative piece on the company's outlook. "As accessory makers perfect wearable mounts for smartphones - and they inevitably will - it becomes hard to justify GoPro's competitive advantage, particularly at 83 times earnings." (Source: Barron's)

Look for more volatility ahead, as GPRO's 25 day quiet period will end on July 20th. After this date, underwriters will be allowed to release their research which will likely lead to a short-term increase in GPRO. However, this stock will inevitably trade downward, as it gets closer to the share lockup expiration in December. If you currently hold this stock, this temporary rise provides a prudent time to sell your shares. Or, if you are more bold, you could initiate a short position here. In my previous bearish article on July 1st, when it was trading at nearly $50 a share, I explored the negative long-term outlook.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: JMP Securities Initiates Positive Coverage For GoPro