GoPro (GPRO) retails cameras, mountable and wearable accessories, and software internationally. The company predominantly caters to active individuals seeking to share their extravagant experiences with others. GoPro has amassed tremendous success in an ultra-competitive market with nifty third-party alliances and its unique product-driven differentiation strategy. I’m bullish on the stock.
Value Drivers
GoPro is the ultimate re-opening play. Most developed nations are set to drop their COVID-19 restrictions with the acceptance that we’ll need to learn how to live with the virus. GoPro is very much linked to travel stocks such as airlines and cruise liners, which analysts remain bullish on for 2022 as implied bookings volume has picked up.
According to Michael Pachter of Wedbush, GoPro’s value drivers are all pointing towards success for the company in the medium term: “There are multiple gross margin expansion drivers in place, including GoPro’s ongoing shift toward DTC sales domestically, growth of its high-margin subscription service, and a product mix-shift toward high-end hardware,”
Pachter stated. I’m positive about the company’s subscription service, which could add more sustainability to GoPro’s topline earnings. Furthermore, a Direct-to-Consumer (DTC) approach displays the company’s brand-building success, allowing it to potentially cut out the middleman for higher profit margins.
A Market Perspective
A look at GoPro from a stock market perspective, everything’s looking up for GoPro apart from hedge fund holdings and technicals, but this can be justified. Hedge Fund 13-F filings are often backward-looking due to the quarterly reporting of previous positions instead of new positions.
The technicals here actually suggest a buying opportunity may be present as the stock is nearly oversold with an RSI of 36. In addition, GPRO stock is trading at a P/E ratio of 9.4, which is 24% undervalued relative to its sector peers, suggesting that it could be a “smart money” move as investors haven’t picked up this hidden gem just yet.
Wall Street’s Take
Turning to Wall Street, GoPro has a Moderate Buy consensus rating, based on two Buys and one Hold assigned in the past three months.
The average GoPro price target of $13.75 implies 64.5% upside potential.
Concluding Thoughts
GoPro is the perfect reopening play as lockdown restrictions have finally eased. The stock isn’t only an excellent systemic play but holds potential with a shift in its business strategy after establishing considerable brand recognition.
Additionally, GPRO stock is nearly oversold and presents investors with the opportunity to get involved before the masses realize the stock’s potential.
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