MORGAN STANLEY: GoPro ‘must find new use cases’

CEO of GoPro Nick Woodman

GoPro has struggled for years to branch out from its core action camera segment, but analysts at Morgan Stanley see promise in the company’s new editing software.

“The recently introduced QuikStories marks steady progress in the right direction,” according to a research note by a team of Morgan Stanley analysts led by Yuuji Anderson. “But we think it is still too early for GoPro's software ecosystem to meaningfully draw incremental adopters to the action camera category.”

The company has admitted to missing the smartphone revolution as far back as 2014 and has been playing catch up ever since. Luckily, Thursday’s earnings were GoPro’s ninth beat in 13 quarters, with a reported loss of $0.09 per share compared to estimates of a $0.25 loss.

“We believe that GoPro's biggest opportunity may be to serve as an untethered lens for the smartphone," CEO Nicholas Woodman said on the company’s earnings call Thursday. "Central to this vision is the belief that GoPro is no longer just a camera, a standalone device. Now, with our seamless app experience, a GoPro is a powerful extension of the smartphone itself."

QuikStories was launched late last month and lets users easily transfer video from their GoPro camera onto a smartphone for easier editing and posting.

The app’s release coupled with another successful quarter led Morgan Stanley to up its price target to $8.50, which GoPro quickly blew past as soon as markets opened Friday, reaching a $10.38 peak mid-morning.

But the bank warns that GoPro still has work to do. “Innovation has slowed and smartphones are good enough for many use cases, which limits incremental adoption of action cameras. GoPro must find new use cases like drones and VR,” the analysts wrote.

“Continued progress in differentiating video editing and sharing capabilities progress is key to consistent product cycles in the long term.”

Seth Archer contributed to this report.