Shares of action camera company GoPro (GPRO 1.17%) sank on Tuesday after a prominent analyst suggested that the stock could be headed even lower. As of 1:30 p.m. ET, GoPro stock was down 7% but it had been down 10% earlier in the trading session.
One analyst says to sell
Erik Woodring is an analyst with Morgan Stanley, one of the larger and more prominent investment firms. Therefore, when Woodring downgrades his outlook to underweight -- as he did today with GoPro -- the market tends to take notice.
An underweight rating basically means that Woodring believes GoPro stock will go down from here, so it's almost the same as recommending that investors sell their shares. Woodring now has a price target of $3 per share for GoPro, down from his previous price target of $4 per share, according to Investing.com.
Is Woodring right?
Woodring is reportedly concerned with GoPro stock due to its slowing subscription growth for cloud storage, among other things. And there's validity to this particular concern. For example, in the third quarter of 2023, GoPro's subscribers were up 20% year over year. That's way down from 55% growth in the same quarter of last year.
Having a subscription product has certainly improved GoPro's business from when it only generated revenue by selling cameras. But I believe there's reason for long-term investors to consider what Woodring is saying. It seems that GoPro really makes some great products that have loyal fans. But it's always been fair to question how big its potential market is.
GoPro only had 2.5 million subscribers in Q3 and it appears to be approaching an upper limit. Therefore, the company may struggle to find any market-beating upside unless management can find a new growth avenue.
