With GoPro's Hero5 Launch Derailed, Bank Of America Downgrades Stock

GoPro Inc (NASDAQ: GPRO) reported its Q3 results significantly short of expectations. With short supply of its Hero5, GoPro will “miss the opportunity to fully capitalize on its new product cycle and drive a hero sized 4Q,” Bank of America’s Jason Mitchell said in a report.

Mitchell downgraded the rating on the company from Buy to Underperform, while reducing the price objective from $17 to $10.

Hero5 Supply Woes

GoPro reported its Q3 revenue at $241 million and EBITDA at $(74 million), versus the Street estimates of $313 million and $(40 million), respectively. GoPro was unable to supply enough Hero5 Black units in the quarter owing to manufacturing issues and indicated that it would be unable to fully supply the channel demand in Q4, which is the critical holiday season, Mitchell noted.

“GoPro encountered manufacturing issues on the Hero5 Black and the Karma Drone and was unable to ship enough Hero5 black units at launch. These operational issues hindered crucial new product launches and potentially endanger holiday sales with its fan base, retailers, and new consumers,” the analyst wrote.

The revenue and EBITDA estimates for FY 2017 have been reduced from $1.77 billion to $1.59 billion and from $59 million to $47 million to reflect lower product shipment expectations.

In a separate report, BlueFin's John Donovan termed GoPro’s Q3 results as “frightening” and its Q4 outlook as disastrous.