Bank of America Merrill Lynch initiated coverage of action camera maker GoPro (GPRO) with a Buy rating and a $19 price target today. The company should benefit from new product launches, inventory reductions that have occurred over the past six months, and new cloud-based offerings, the firm believes.

NEW PRODUCTS: GoPro's new line of cameras, the HERO5, is due out this fall, noted Bank of America analyst Jason Mitchell. The analyst expects the cameras to include many new features, such as voice controls, a waterproof body, and a lighter design with built-in GPS. Additionally, GoPro will introduce a new "drone accessory" for its cameras on September 19, the analyst reported. The Street does not believe that the new products will increase the company's sales, but the new offerings could easily enable GoPro's topline to come in "well above" the consensus outlook, according to Mitchell.

CHANNEL INVENTORY CLEARING: In 2015 and part of 2016, GoPro sold too many units into the channel, Mitchell wrote. However, over the last two quarters, GoPro has corrected this imbalance, as about 50% of its unit sales were outside of the channel, the analyst stated. According to Mitchell, that trend is probably continuing this quarter and the channel inventory draw down should help spur an acceleration in the company's revenue and margin growth in Q4.

CLOUD OFFERINGS: Noting that GoPRo's new cameras are connected to the cloud, Mitchell thinks that the company will create "a cloud connected content platform for storing videos." The platform could eventually become "a high margin subscription service for storage and editing," Mitchell believes. Moreover the platform could increase the stickiness of its customer base and differentiate it from lower cost competitors, the analyst wrote.

STREET-HIGH TARGET: The $19 price target set by Mitchell matches the target on GoPro shares set by research firm Hilliard Lyons. According to Bloomberg data, no other firm's that cover the stock have a target higher than $16 per share.

PRICE ACTION: In morning trading, GoPro rose 5% to $14.87.