GoPro (GPRO) Hero 5 Black Checks in Line, Distribution 'Spotty' - Pacific Crest
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Pacific Crest maintained its Sector Weight rating on GoPro (NASDAQ: GPRO). Analyst Brad Erickson said early Hero 5 Black checks are in line, though checks also indicate "unusually spotty distribution." He also pointed out shelf-space headwinds and weak session demand. Overall he said he needs to see sell-through improve to sway his fair value of $9 to $10.
"Our checks over the past 11 days since Hero 5 products launched have shown unusually inconsistent distribution, with Best Buy being the only retailer we spoke to having had steady stock. In cases like Target, WalMart or REI, it’s unclear whether GoPro is playing catch-up on its initial ship-in, or if some retailers are proactively managing down GoPro’s shelf space," said Erickson.
"Positively, we found overall days of inventory at <9 days; no cause for concern, from our perspective, as we estimate overall sell-through tracking up nearly 30% y/y. Negatively, we think 80% to 90% of initial demand is skewing toward the Hero 5 Black, which we view as indicative that Session is off to a disappointing start. Sales person feedback indicates that the touch screen functionality and similar video quality of the Black is proving more compelling at only $100 more," continued the analyst.
Erickson added, "We talked to 10 specialty drone retailers and found better-than-expected initial demand for DJI’s Mavic Pro set to be released mid-month; positive for chip-supplier AMBA and unclear for GPRO. With the Street having fewer than 150,000 drones in their Q4 models and GPRO having 45,000 points of distribution, the Q4 bar looks extremely low, in our view."
Shares of GoPro closed at $13.84 yesterday.
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