Close

GoPro (GPRO) Drones Could Conservatively Be Worth $17.50/Share, Dougherty & Co. Says (AMBA)

May 28, 2015 7:45 AM EDT
Get Alerts GPRO Hot Sheet
Price: $2.17 --0%

Rating Summary:
    4 Buy, 11 Hold, 6 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 9 | Down: 8 | New: 41
Join SI Premium – FREE

Dougherty & Co analyst Charles Anderson weighed in on GoPro (NASDAQ: GPRO) after CEO Nick Woodman confirmed Wednesday night at the Code Conference that the company will release its own quadcopter drone, for the consumer market, in 1H16.

Anderson notes while a drone has been widely speculated on for the past year, this is the first time the company has admitted that this product is in the work. He said one of the key planks in their thesis is that GoPro will extend its brand to adjacent product categories. Drones have always been the most logical extension, he said.

The analyst said drones could be worth $17.50 of upside to the stock. "We are not aware of any sell-side forecasts that incorporate drone revenue for GoPro (including our own)," he commented. "In terms of the potential impact, we note that leading consumer quadcopter drone-maker DJI (of China) is expected to sell over $1B of product in 2015 (roughly double 2014 revenue). If we assume DJI will have 80% market share this year and that the market will grow 50% in 2016, the addressable market is about $1.9B in 2016. If we give GoPro 25%. market share and assume 30% incremental margins, that would deliver $475MM of incremental revenue to our model and ~$0.70 of incremental EPS to our FY16 estimate of $2.02. At a 25x multiple, that would be worth $17.50 of upside to the stock."

Anderson continued, saying they may be being conservative. "DJI is on track to do $1B in quadcopter drone sales yet they have very little in the way brand equity or retail distribution compared to a GoPro (which has a giant distribution platform via its YouTube channel subscribers and Instagram followers and a large retailer footprint). Should someone of GoPro's visibility enter this market, they may act as a multiplier for demand. And we expect other consumer electronics brands to join the race, including Garmin (GRMN, Buy, PT$60). We are personally of the belief that over time the quadcopter drone market will dwarf the standalone GoPro market due to the seemingly endless applications (photography, search and rescue, real estate, sports, etc.)."

The analyst also believes the news is also a likely positive for Neutral-rated Ambarella (NASDAQ: AMBA).

Charles Andersonprice target of $65.00

For an analyst ratings summary and ratings history on GoPro click here. For more ratings news on GoPro click here.

Shares of GoPro closed at $53.28 yesterday.



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Analyst Comments, Hot Comments, Rumors, Trader Talk