NEW YORK (TheStreet) -- GoPro (GPRO) - Get GoPro, Inc. Class A Report stock is retreating 6.89% to $19.04 in afternoon trading on Monday after Pacific Crest analysts said the action camera market is softening, which will lead to disappointing holiday sales.
The San Mateo, CA-based company produces wearable and mountable cameras and accessories.
Sales of cameras, like the ones made by GoPro, have seen weak sales leading into the holiday season, while sales of televisions and mobile phones are picking up, Pacific Crest said in an analyst note.
"That we are less than a week away from Thanksgiving and are still finding sell-through run-rates like those we found in the first half of the year reinforces our view that action cameras are increasingly saturated," analysts added.
The firm lowered its price target to $77 from $102 on Ambarella (AMBA), which makes chips for GoPro cameras.
Ambarella's stock rating remained at "overweight" because the company produces chips for other electronics, such as drones, security cameras and police cameras.
"While the GoPro demand environment has worsened significantly, driving the recent sell-off in Ambarella, we think investors continue to underappreciate the other parts of the business," analysts said.
Ambarella stock is declining 6.43% to $54.71 in afternoon trading.
TheStreet Ratings team rates GOPRO INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
We rate GOPRO INC (GPRO) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GPRO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 74.81%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- Net operating cash flow has significantly decreased to $4.62 million or 90.16% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Household Durables industry average, but is greater than that of the S&P 500. The net income increased by 28.6% when compared to the same quarter one year prior, rising from $14.62 million to $18.80 million.
- 48.51% is the gross profit margin for GOPRO INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.69% trails the industry average.
- GPRO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, GPRO has a quick ratio of 1.83, which demonstrates the ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: GPRO
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.