The Ratings Game: GoPro’s main use cases have been ‘devastated’ by COVID-19, analyst warns

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GoPro Inc. faces “unprecedented” challenges as two of the main use cases for its cameras—travel and adventure—have been “devastated” by the COVID-19 pandemic, according to an Oppenheimer analyst.

Andrew Uerkwitz sees near-term headwinds for the maker of action cameras as the novel coronavirus outbreak has curtailed travel and prompted many consumers to shift consumer-electronics spending toward technology that helps them work from home, rather than devices like GoPro GPRO, +1.15%  cameras.

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“If GoPro still intends to ship a new Hero this fall, inventory will need to be worked down, likely at discount,” Uerkwitz wrote.

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While he’s cautious in general about the company’s immediate-term prospects, Uerkwitz isn’t too worried about the company’s cash position.

“As of Dec. 31, the company had $165 million cash, and $201 million in accounts receivable,” he wrote. “The company also has an untapped credit facility of $250 million (with limitations and expires March 2021). Looking further out, $175 million convertible notes are due 2022.”

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Uerkwitz remains upbeat about the shares over the long run, maintaining an outperform rating and $7 price target even as he cut June-quarter estimates by 40%.

“Even in bear case scenarios, we believe the brand and market leadership has more value than where the stock is currently trading,” he wrote. “We suspect all options are on the table, and expect the company to return to profitability medium term.”

The stock has lost 28% over the past month as the S&P 500 SPX, +2.64%  has dropped 21%.