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The Ratings Game: GoPro stock rallies after J.P. Morgan cheers subscriber momentum in upgrade

Shares of GoPro Inc. are gaining in premarket trading Thursday after the maker of action cameras found a new fan on Wall Street.

J.P. Morgan analyst Paul Chung upgraded the stock to overweight from neutral Thursday, cheering the company’s progress in growing its direct-to-consumer business and increasing the number of subscribers to its platform. He raised his price target on GoPro’s

shares to $15 from $13.

GoPro shares are up 5.6% premarket, putting them on track to open at a five-month high.

The company has been able to drive stronger subscriber attach rates with its Hero 10 camera line than with the Hero 9 camera line, Chung wrote, following recent conversations with GoPro’s management team. That’s one factor helping the company’s gross margins, along with higher camera prices.

Overall, Chung is upbeat about GoPro’s financial strides, writing that the company is on track to deliver more free-cash flow in 2021 than its “cumulative free-cash flow performance” since its 2014 initial public offering.

Chung sees GoPro as a “reopening play,” as the company could be helped by the resumption of normal travel trends. Travel may have accounted for 10% of GoPro’s unit sales previously, he said, due to dynamics like duty-free shopping, positioning the company to benefit next year if the world opens up more.

The upgrade from J.P. Morgan is at least the second one this month. Analysts at Morgan Stanley raised their rating on the stock to equal weight from underweight last week, citing the company’s improved execution and messaging, though the Morgan Stanley team wasn’t ready to turn bullish on GoPro.

GoPro recently delivered an upbeat earnings report, while executives commented that they felt confident about their ability to meet full-year expectations, even if the global supply crunch may limit upside in the holiday period.

Shares have gained 15% in the past three months as the S&P 500

has risen about 7%.

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