Will GoPro Stock Die in 2016, or Does It Have an Ace in the Hole? (GPRO)


GoPro stock - Will GoPro Stock Die in 2016, or Does It Have an Ace in the Hole? (GPRO)

GoPro (GPRO) wiped out big-time last year, but investors can see rays of light peeking out of those clouds going into 2016.

gopro 185Consider that Tuesday the company received some nice support from JPMorgan Chase analyst Paul Coster. Granted, the impact on GoPro stock was temporary, but there are certainly reasons to be bullish.

Keep in mind that — back in early December — Coster published a report that included a cut in the price target from $55 to $45. He was concerned about lackluster sales of the Hero cameras.

But as of now, Coster believes that GPRO may have instead proved to be more resilient. According to the latest report:

“We think GoPro Hero 4 Black and Silver models have sold-through well during the holiday season based on our channel checks, which suggests 4Q results may come in better than initially feared.”

But Coster is not alone in his upbeat view on GoPro stock. Just look at Charlie Anderson, who is an analyst at Dougherty & Co, encouraged about holiday sales for the Hero due to positive trends in App Store downloads.

Putting the Sizzle Back in GoPro Stock

Yet, there are other factors that are likely to help boost the price of GoPro stock. First of all, there is the Consumer Electronics Show, which will get started Wednesday. GoPro is likely to have a big presence at the show — the highlight being its upcoming drone offering, called the Karma.

The buzz is that this device will come with a 360-degree camera. If so, this could mean that the Karma could create some really compelling content, which should help spur sales.

Already GPRO has been putting together partnerships for this kind of video, such as with mega operators like Facebook (FB) and Alphabet’s (GOOG, GOOGL) YouTube. The company also purchased Kolor, which is a startup that is focused on 360-degree video.

Although, the Karma is likely not to be the only offering on the product front for 2016. It also looks like GPRO will upgrade its core models, such as the Hero Black and Silver.

Bottom Line on GoPro Stock

For the most part, the valuation on GPRO stock is fairly attractive. Consider that the forward price-to-earnings ratio is at about 16 and the price-to-sales ratio is 1.4. By comparison, Fitbit (FIT) sports a forward P/E of 24 and a P/S multiple of 4.

In other words, if GPRO can jumpstart its growth, the impact on the stock could be significant. Besides, there will probably still be chatter of a potential buyout, such as from suitors like Apple (AAPL), Alphabet or Sony (SNE).

The fact is, GoPro has a premium global brand, a profitable core business, the potential for exciting new products and also lots of social media juice — 3.6 million subscribers on YouTube and 9.3 million friends on Facebook.

Of course, the Karma may ultimately flop and GoPro could fail with its new line of cameras. But then again, this is always the risk with an innovative hardware company. The good news is that the bar is already set low, as GPRO stock is off about 71% during the past 12 months.

If you’re bullish on GPRO, this is as good an entry point as any to jump in.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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