GoPro's second-quarter fundamentals remain under pressure; price target cut to US$0.50

Overview

Morgan Stanley believes GoPro continued to face multiple macro and company-specific headwinds in the second quarter of 2026. Revenue and end-market sales declined significantly, while memory shortages and cost increases, demand elasticity after price hikes, ongoing competition, and weaker channel support collectively pressured profitability. MISSION 1 and subsequent new products have brought some progress to the product roadmap, but are not yet sufficient to reverse demand trends. The company's strategic review has entered a later stage and could lead to transaction or partnership opportunities, but the outcome is highly uncertain; therefore, the research institution maintains its Underweight rating.

Core views

The core view is that GoPro has not yet shown signs of sustainable stabilization in revenue or margins. Even though the company has the broadest camera portfolio in its history, end-market demand still declined nearly 40% year over year, indicating that an increased number of new products has not yet translated into overall growth. Growth in the subscription business and its higher revenue contribution are among the few positives, but the contraction in the hardware business and low gross margin remain dominant. The strategic review provides event-driven upside potential, and new products such as HERO BLACK may also improve growth, but revenue forecasts remain cautious until demand, cost, and competitive pressures clearly subside.

Analysis framework

The report combines the second-quarter earnings release, conference call, and subsequent management communications to analyze revenue, end-market sales, gross margin, subscription business, and product roadmap, while adjusting earnings forecasts through Morgan Stanley ModelWare. Valuation uses an EV/EBITDA multiple based on expected 2027 adjusted EBITDA, while bull, base, and bear case scenarios are set to assess strategic progress, demand recovery, and execution risks.

Methodology notes

• Valuation methodsEV/EBITDA valuation

  Enterprise value to earnings before interest, taxes, depreciation, and amortization multiple

  The base-case price target of US$0.50 is calculated using expected 2027 adjusted EBITDA of US$23 million and a 5x EV/EBITDA multiple, broadly in line with hardware companies with unstable fundamental performance.

• Scenario AnalysisBull, Base, and Bear Case Scenarios

  Different valuation paths based on demand, product launches, subscription growth, and execution performance

  The bull-case price target is US$1.00, using 2027 EBITDA of US$35 million and 6x EV/EBITDA; the base-case price target is US$0.50; the bear-case price target is US$0.20, using 2027 sales of US$625 million and 0.1x EV/sales.

• Earnings ForecastMorgan Stanley ModelWare

  Institutional financial forecasting model

  The research team lowered revenue and earnings forecasts based on quarterly results, product plans, shipment volumes, average selling price, gross margin, and expense assumptions; consensus data is provided by Refinitiv Estimates.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• GoPro Inc (GPRO.US) Common Stock

  Directly covered security in the report

  Strengths

  Brand and camera technology have certain strategic value; the product portfolio has expanded across multiple price points and user tiers; subscription revenue, attach rate, and services revenue contribution continue to rise; the strategic review may bring a transaction or partnership catalyst.

  Weaknesses

  Revenue and end-market sales continue to decline sharply; normalized gross margin is low; the company is relatively sensitive to hardware demand, channel support, and component costs; historical execution performance has been unstable.

  Comparison

  The base-case valuation uses 5x 2027 EV/EBITDA, broadly consistent with other hardware companies under research coverage that have unstable fundamentals.

  Risks

  Continued weak demand, longer replacement cycles, delayed product launches, lower-priced products pressuring higher-end products, memory cost inflation, subscription churn, and an unfavorable outcome from the strategic review.

Key data

• Second-quarter revenue growthDown 31% year over yearThe decline widened further from a 26% year-over-year decrease in the first quarter.
• Second-quarter end-market salesDown 38% year over yearMISSION 1 performed in line with management expectations, but the product remains relatively niche and contributed only modestly to overall end-market sales.
• Reported gross marginApproximately 30%Includes US$19 million in tariff refund benefits.
• Normalized gross marginApproximately 12%Calculated excluding tariff refunds; down significantly year over year, but up about 8 percentage points from the first quarter.
• Subscription revenue growthUp 11% year over yearSubscription and services revenue accounted for nearly 30% of total revenue, versus about 17% a year earlier.
• Subscription attach rate69%Compared with 54% a year earlier.
• Price target adjustmentReduced from US$1.30 to US$0.50Reflects lower revenue and earnings forecasts and a reduction in the target valuation multiple to 5x EV/EBITDA.
• Base-case 2027 adjusted EBITDAUS$23 millionUsed to calculate the US$0.50 price target.
• Scenario price target rangeUS$0.20 to US$1.00Corresponding to the bear and bull case scenarios, respectively.

Impact & implications

The report's implications for GoPro shares are negative: the US$0.50 price target is below the US$0.70 reference share price, implying approximately 28.6% potential downside. Near-term valuation may be driven by news on the strategic review and new product launches, but fundamental improvement requires joint validation from stabilization in end-market demand, easing competition, lower memory cost pressure, and gross margin recovery. Growth in the subscription business helps increase the proportion of recurring and high-margin revenue, but its current scale is still insufficient to offset the contraction in hardware sales.

Risks

• Weak consumer demand persists longer than expected, causing further declines in camera shipments and revenue.
• Memory shortages and cost increases continue to compress gross margin.
• Raising average selling prices may trigger greater demand elasticity and suppress unit sales.
• Intensified competition and weaker channel support lead to sell-in and end-market sales below expectations.
• Delayed new product launches or insufficient market acceptance fail to drive sustainable growth.
• The product mix shifts toward lower-priced devices, pressuring average selling price and cannibalizing demand for high-end cameras.
• Subscription churn accelerates, limiting growth in the high-margin subscription business.
• There is significant uncertainty around the outcome, transaction terms, and completion timing of the strategic review.
• The company's execution performance deteriorates again, limiting earnings recovery and valuation expansion.

What to watch

• Final outcome of the strategic review, potential participants, and transaction or partnership arrangements.
• Launch timing, pricing, and market acceptance of the new HERO BLACK expected in the second half of 2026.
• Sales contribution from the MISSION 1 series and MISSION 1 Pro ILS.
• Whether end-market sales begin to stabilize from a year-over-year decline of nearly 40%.
• Changes in memory supply, component costs, and normalized gross margin.
• Impact of price increases on average selling price, unit sales, and product mix.
• Subscription user growth, attach rate, churn rate, and services revenue contribution.
• Progress on the motorcycle helmet product to be launched in partnership with AGV in 2027.
• Whether the company resumes providing forward-looking earnings guidance.