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The Ratings Game: GoPro is a ‘standout’ as supply crunch plagues other tech names, analyst says in upgrade

Shares of GoPro Inc. are surging in Monday morning trading after an analyst upgraded the stock, calling the maker of action cameras a “standout” in the world of consumer electronics.

Wedbush analyst Alicia Reese boosted her rating on GoPro shares
GPRO,
+3.28%

to outperform from neutral Monday, while raising her price target to $13.50 from $11. The stock is up nearly 6% in morning trading.

One reason for Reese’s optimism is that the company “got ahead of supply-chain issues and component shortages,” allowing GoPro to avoid showing “any material negative impact” with its third-quarter results. Reese expects that the company will show similar resilience in the holiday quarter.

“The bottom line, in our view, is that GoPro has found its groove, even amid current supply-chain tumult,” Reese wrote.

She also is upbeat about GoPro’s progress in driving more direct-to-consumer sales. The company’s DTC push “drove profitability in 2020 in spite of significantly reduced marketability during lockdowns” and continues to help GoPro’s margin performance. Reese expects that the growing importance of DTC sales could allow GoPro to further expand gross margins going forward.

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The company also stands to benefit from a travel rebound. GoPro “still managed to profitably expand its user base” during the stretch of lockdowns, and the company has exciting opportunities ahead once travel trends start to normalize, according to Reese.

“We see this as an important upcoming catalyst, and also think that GoPro is poised to expand its hardware into derivative products with specialized use cases to expand its user base, with only marginal R&D and manufacturing costs,” she wrote.

Reese joins analysts from Morgan Stanley and J.P. Morgan, who both upgraded the stock last month.

Shares of GoPro have rallied roughly 20% over the past three months as the S&P 500
SPX,
-0.75%

has risen about 5%.

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