GoPro's Karma drone should drive significant revenue this year

GoPro's Karma drone could be poised for a strong relaunch this year. Image source: GoPro, Inc.

What happened

Shares of GoPro Inc. (GPRO) climbed as much as 11.1% early Tuesday, then settled to trade up 7.9% as of 2:00 p.m. EST following an encouraging analyst note.

So what

More specifically, Pacific Crest analyst Brad Erickson reiterated his sector weight rating on GoPro shares, and offered a fair value estimate of between $9 and $10 per share. For perspective, GoPro closed yesterday's trading session at $9.40 per share.

The credit for his slightly more bullish stance goes to a combination of increased estimates for Karma drone shipments this year, GoPro's "impressive ability to pivot point-of-purchase displays" to sell its $300 Karma Grip stabilizer when it became clear recalls would delay Karma's launch, and stronger-than-expected holiday demand for GoPro's new flagship HERO 5 camera line. Assuming GoPro relaunches Karma some time in the second quarter, Erickson also believes it will be able to ship 150,000 Karma drone units this year, driving incremental revenue of $88 million.

Now what

This shouldn't be entirely surprising. After all, GoPro already indicated its core camera device lineup was enjoying strong demand early in the holiday season. And just a few weeks ago, GoPro confirmed it's ready to relaunch Karma in 2017, while promising more details to that end along with its fourth-quarter 2016 earnings report early next month. As it stands, it's hard to blame investors for their renewed optimism as Wall Street jumps on board, and it's no surprise to see GoPro stock trading higher today.