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Is GoPro Stock Worthy of These Eight-Month Highs?

By Rick Munarriz - Sep 26, 2018 at 3:17PM

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The leading maker of wearable cameras climbs after an Oppenheimer upgrade. There's a lot riding on the company's new Hero7 product line.

After three brutal years of declines, it seems as if GoPro (GPRO 4.64%) investors are finally catching a break. On Wednesday, shares of the action-camera maker hit their highest levels since early January, shooting higher after Oppenheimer analyst Andrew Uerkwitz upgraded GoPro to outperform from perform. He's excited about the prospects for the new products that GoPro announced last week.

The Wall Street boost finds GoPro shares at an eight-month high, and if we trace the stock down to its springtime low, we see that it has soared 69% at Wednesday's intraday high since then. This is obviously a great return for investors who successfully nailed the bottom five months ago.

But the stock's hearty appreciation naturally places a lot of pressure on the success of the new Hero7 product line. GoPro has fallen short of delivering on the hype before. And now with some big stock gains under its belt, there's plenty of room to fall if it falls short again.

GoPro Hero7 in TimeWarp mode in Tahiti.

The GoPro Hero7 visiting Tahiti. Image source: GoPro.  

Seven up

There are plenty of new features and enhanced options in the flagship $399 Hero7 Black action camera. The more economically priced Hero7 Silver and Hero7 White models also pack beefed-up specs relative to the Hero6 product line at similar price points. 

GoPro is playing up the gimbal-like image stabilization of the Hero7 Black and a new time-lapse function. But the real driver here has to be the ability to stream in real time across various social media platforms. Hero7 Black is the first GoPro camera to allow live-streaming. This is a pretty big deal, in terms of publishing simplicity. Smartphones have been the live-streaming devices of choice because of their convenience and connectivity. 

Granted, it's still not as easy as streaming on your phone. You can't live-stream directly from the Hero7 Black. You need to fire up the GoPro app on an iOS or Android device and initiate the streaming process that way to go online. However, for video buffs who can appreciate the superior quality of a dedicated action camera over a multipurpose smartphone, it could be a game changer for GoPro. 

Oppenheimer's Uerkwitz believes that the new Hero7 line is compelling and appropriately priced. Throw in improved editing software and a generous upgrade offer for current Hero camera owners -- along with improvements on GoPro's end in terms of reducing its operating expenses and clearing out existing retailer inventory -- and Uerkwitz sees a return to growth next year. His $9 price target is ambitious even off today's highs, and it would mean the stock more than doubles from its springtime bottom. His price goal is the highest among the seven major analysts covering GoPro. 

The return to growth in 2019 could certainly help justify the percolating stock price. GoPro is halfway through its third consecutive year of declining revenue. Sales remain well off their 2015 peak. One can argue that the stock is turning around before the company does, but it doesn't mean that this is the end of the rally.

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