GoPro GPRO is one of many tech companies navigating major supply chain issues that plague the industry. According to Wedbush Securities Equity Research Analyst Alicia Reese, there may be a positive outlook on the action camera company's stock going into the new year.
Reese told Yahoo Finance Live that GoPro has some really nice pieces that set them apart from other consumer electronics companies in the near term. Everyone is feeling the crunch of supply chain issues. I think GoPro got ahead of that. We saw some of that in Q 3, where their gross margin increased by over 700 basis points. Reese joined Yahoo Finance Live to discuss Wedbush Securities upgrade of GoPro stock based on their recent success despite supply chain disruptions and shortages, as well as opportunities for the company when travel restrictions are eventually loosened. Wedbush Securities, a Los Angeles-based investment firm, provides clients with securities brokerage, wealth management, and investment banking services.
Wedbush upgraded GoPro to Outperform from its previous rating of Neutral, along with a price target of $13.50. Since its successful IPO in June of 2014, its shares have fallen flat due to declines in revenue and earnings. The GoPro stock value has risen by about 20% over the past year, trading around $10.28 today.
Reese attributed GoPro's success in weathering supply chain constraints to its focus on manufacturing its HERO 10 Black, the latest and most powerful installment in the company's HERO line of premium action cameras. This allowed GoPro to narrow down its materials allocation and manufacturing process. In addition, Reese said that the company also raised the average selling price of the product, driving gross margins higher. She believes that this dynamic will continue through Q 4 and into 2022.
That is a longer term play that's been happening for a while and we think that continues well into 2022, according to Reese. In terms of the obstacles that may be on the horizon for GoPro, Reese cited the risk of an ill-timed merger, acquisition or even a new product. She pointed out that the company's foray into the drone space was one example of a product that fell flat.
One of the things that happened in the past that was really upset investors and driving investors away from the stock was their drone project. That was an epic failure, Reese said. Management has found their niche now, and they know how to deal with their products and market their products to their customers, and not to go off and do something quite outlandish.