In a note Tuesday morning, analysts at JMP initiated coverage of GoPro with a “market outperform” rating and a price target of $60, a premium of more than 60% over yesterday’s close. JMP estimates that GoPro, which makes wearable cameras for extreme sports enthusiasts, will achieve 22% revenue growth in both 2014 and 2015 to reach $1.5 billion in sales and EPS of $1.00. In 2016, they model growth to accelerate to 35%, to reach $2 billion in sales and EPS of $1.78.
“We feel its market vision and execution have established GoPro as a durable multimedia and active lifestyle brand,” JPM wrote, citing sales and a strong YouTube and media presence. “Our positive investment stance is predicated on the view that first mover and financial advantages will allow it to capitalize on a multitude of underpenetrated and/or untapped opportunities to monetize its technology and brand.”
GoPro went public on June 25, after which shares have surged more than 60%. Shares fell 5.2% yesterday after a Barron’s article question the company’s future, noting that smartphones will likely be able to render GoPro obsolete.
Microsoft (MSFT) shares rose 0.7% to $42.45 after reports that they were cutting jobs.
Sources told Bloomberg that Microsoft is planning its biggest round of job cuts in five years. These reductions, which may be revealed this week, will take place mainly in the Nokia division, marketing, and engineering. According to the Bloomberg sources, the number of jobs cut will exceed the number in 2009, when the company cut 5,800 jobs, or about 5% of their workforce at the time, in one year. The company is looking to slim down and to integrate the Nokia Oyj handset unit.
These rumors come less than a week after CEO Satya Nadella released his first company mission statement on July 10, which promised big changes at the company and a renewed focus mobile devices, cloud-computing and productivity software. Nadella wrote that plans for his more focused and efficient Microsoft would be unveiled next month.
As of June 5, Microsoft has 127,104 employees, including 30,000 added after acquiring Nokia’s handset unit. After the Nokia acquisition in September, Microsoft promised $600 million in annual cost savings eighteen months after the close of the deal. The Bloomberg sources noted that in order to achieve that benchmark, jobs will likely be cut in the areas where Nokia and Microsoft overlap.
Yesterday, Nomura analyst Rick Sherlund raised his price target to $50 from $45 and reiterated his “Buy” rating. “We expect bold moves and organizational change intended to restore a culture of innovation” from Nadella, Sherlund wrote. “Our expectation is for a substantial ($1 billion plus) charge to mitigate the Nokia acquisition risk and focus the strategic direction of the company” toward the businesses Nadella highlighted, such as productivity apps and cloud businesses.
Shares of Hewlett-Packard (HPQ) were rising 0.3% to $34.24 following the resignation of the company’s interim chairman.
HP announced today that effective tomorrow, interim chairman of the board Ralph Whitworth has resigned to focus on his health. Whitworth is also taking a leave of absence from his investment company, Relational Investors. Whitworth was appointed interim chairman in April 2013 and has been a member of HP’s board of directors since 2011. He co-founded Relational Investors in 1996.
“Ralph has been a friend and close advisor to me, the HP leadership team and every member of the board for nearly three years,” CEO Meg Whitman said in a statement. “He has been a wonderful contributor to our efforts to turn HP around.”
“HP has made enormous progress reconstituting its board, implementing world-class capital allocation and corporate governance practices, and putting the company back on strong financial footing,” said Whitworth in his own statement. “HP’s shareholders can be very confident that Meg, her team and the current board will stick to the strong practices and discipline we’ve put in place.”
Facebook (FB) shares slipped 2.1% to $66.49 after remarks from Federal Reserve chair Janet Yellen.
Yellen said in her report to Congress on the state of monetary policy, released today, that valuation measures for the overall market in early July were "generally at levels not far above their historical averages." However, she cautioned that "valuation metrics in some sectors do appear substantially stretched-particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year."
In a second mention of social media companies in the report, she noted that "signs of risk-taking have increased in some asset classes" like social media and biotech firms, "with ratios of prices to forward earnings remaining high relative to historical norms." After her remarks were made public, Facebook and Twitter (TWTR) shares began to fall.
Yellen will testify before Congress today and tomorrow. Since her semiannual report to Congress in February, the unemployment rate has fallen to 6.1% from 6.7% and inflation has risen to 1.8% from 1.2%. Both these metrics are close to Fed targets of maximum employment and 2% inflation. "While conditions in the labor market have improved appreciably, they are still far from satisfactory," Yellen said in an update on the economy to the Joint Economic Committee in May.
Yahoo! (YHOO) shares fell 1% to $35.34 ahead of its earnings release tonight.
Yahoo! reports its second quarter earnings this afternoon after market close. Analysts surveyed by Thomson Reuters expect an EPS of $0.38 on $1.084 billion in sales, up just 1.3% year over year and flat sequentially. Yahoo!'s performance is expected to center around Alibaba, the Chinese e-commerce giant set to go public in August. Yahoo! owns a 22.5% stake in Alibaba, worth up to $10 billion. Cantor Fitzgerald analyst Youssef Squali, who has a "buy" rating and a $42 price target on Yahoo!, wrote in a note, "The outcome of the highly anticipated Alibaba IPO in August, the tax treatment of the proceeds and use of the new cash are likely to drive the stock short-term, which is something we don't believe is appropriately reflected in the current valuation."
Other highly-anticipated issues in the Yahoo! report include ad growth, which Yahoo! reported in April for the first time since Mayer became CEO; video, including Yahoo!'s acquisition of RayV and the high-profile decision to resuscitate the NBC sitcom Community; and the potential tax bill from the Alibaba stake.
Mayer and CFO Ken Goldman will discuss the earnings in a video conference call at 5:00 pm ET.
--Written by Laura Berman in New York
>Contact by Email.