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GoPro (GPRO) Up 11.5% Since Earnings Report: Can It Continue?
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About a month has gone by since the last earnings report for GoPro, Inc. (GPRO - Free Report) . Shares have added about 11.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
GoPro Q2 Loss Narrower than Expected, View Positive
GoPro earnings remained in the red for the second consecutive quarter, as it reported second-quarter 2017 non-GAAP loss of 9 cents per share. The company has lost money in six of the last seven quarters.
However, this time, the action camera maker’s bottom-line figure crushed expectations, as GoPro’s bottom line trumped the Zacks Consensus Estimate of a loss of 26 cents by a whopping 65.4%.It seems that the company’s substantial cost-cutting initiatives were highly successful in stemming its earnings decline.
On a GAAP basis, the company reported a loss of 22 cents for the quarter, which was down 66.7% year over year. The company posted better-than-expected revenue numbers for the quarter and also reduced its operating expenses significantly.
Inside the Headlines
GoPro surprised investors with its sales figures, as its quarterly revenues grew an impressive 34.3% from the prior-year quarter tally to $296.5 million. This marked the company’s third consecutive quarter of revenue growth after four successive quarters of sales declines. The top line also beat the Zacks Consensus Estimate of $271 million.
The revenue growth was driven by robust sales of the latest Hero5 cameras, Karma growth and strong accessory revenue. Further, more than half of the revenue came from overseas. On a year-over-year basis, the APAC region boasted the strongest revenue growth at 67%.
HERO5 Black was the best-selling digital imaging device in units and dollars in the U.S. for the second consecutive quarter. Further, Karma was the second best-selling drone brand in the U.S. in the second quarter. Karma was recently launched in international markets, including the UK, Germany, France, Korea and Japan.
For the quarter, R&D expenses were down 40.4% year over year. In addition, sales and marketing expenses plunged 33.2% year over year.Second-quarter operating expenses came in at $156.8 million, down 35.5% year over year.
Non-GAAP gross margins contracted 620 bps year over year to 36.2%. Non-GAAP operating loss came in at $9.3 million, down 89.6% from $89.3 million generated last year.
The company focused on improving inventory and channel management, which resulted in a 39% reduction in inventory sequentially, and forward weeks of supply in the channel are down 25%. This bodes well for GoPro’s upcoming product launches.
Restructuring
GoPro has been aggressively cutting costs in recent timesthrough a series of layoffs and revealed plans to cut 270 jobs in March this year. Last year, the company conducted two rounds of layoffs, cutting 7% and 15% of its workforce in January and November, respectively. GoPro also shuttered its entertainment and media business as part of its restructuring.
GoPro also shifted most of its software development to a more economical location like Romania, while its customer support and administrative services have been moved to the Philippines. The company streamlined the supply chain and also made changes to its product packaging and shipping.
GoPro believes that its restructuring efforts will help it bring down full-year GAAP operating expenses below $585 million and non-GAAP operating expenses below $495 million. The company also assured that it would bring down operating expenses by over $200 million and return to EBITDA profitability in 2017.
In addition, it affirmed that these cost-cutting efforts will not interfere with its pipeline of hardware and software product launches.
Notable Developments
The company rolled out QuikStories (a new GoPro App feature) last month, which automatically pulls footage from a HERO5 camera and creates ready-to-share videos on the user’s phone. QuikStories creates polished, shareable videos featuring customizable music, filters and effects. The company is highly optimistic about this product and expects it to become a game changer.
In April, GoPro announced the development of Fusion, a 5.2k spherical camera that is designed to be capable of capturing both virtual reality and standard video and picture.Along with the new camera, a pilot program is being conducted for Fusion, allowing professional content creators to gain early access to the camera and provide feedback.Fusion is scheduled to be on the market by the end of 2017 and will likely be available in the holiday season to boost sales.
Liquidity
Exiting the quarter, the company had cash and cash equivalents of $149.8 million, down significantly from $192.1 million as on Dec 31, 2016.
Guidance
In light of a relatively strong quarter, the company gave a decent guidance for third-quarter 2017. It projects revenues of about $300 million (+/- 10 million) for the quarter. The company expects gross margin to be 37% (+/- 1%).
For full-year 2017, GoPro plans to limit its non-GAAP operating expenses in 2017 to $495 million, in an attempt to try to return to full-year profitability. This is comparable to a 2016 figure of about $709 million.
GoPro should be able to attain these massive cost reductions, in light of its recent job cuts and business restructuring, which did away with many high-cost operations, including its entertainment division.
It is likely that GoPro’s sales will gradually improve, as it ramps production and Karma gains traction in international markets. This will supplement the company’s cost-reduction initiatives and enable it to achieve sustained, profitable growth.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter In the past month, the consensus estimate has shifted up by 52.3% due to these changes.
At this time, the stock has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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GoPro (GPRO) Up 11.5% Since Earnings Report: Can It Continue?
About a month has gone by since the last earnings report for GoPro, Inc. (GPRO - Free Report) . Shares have added about 11.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
GoPro Q2 Loss Narrower than Expected, View Positive
GoPro earnings remained in the red for the second consecutive quarter, as it reported second-quarter 2017 non-GAAP loss of 9 cents per share. The company has lost money in six of the last seven quarters.
However, this time, the action camera maker’s bottom-line figure crushed expectations, as GoPro’s bottom line trumped the Zacks Consensus Estimate of a loss of 26 cents by a whopping 65.4%.It seems that the company’s substantial cost-cutting initiatives were highly successful in stemming its earnings decline.
On a GAAP basis, the company reported a loss of 22 cents for the quarter, which was down 66.7% year over year. The company posted better-than-expected revenue numbers for the quarter and also reduced its operating expenses significantly.
Inside the Headlines
GoPro surprised investors with its sales figures, as its quarterly revenues grew an impressive 34.3% from the prior-year quarter tally to $296.5 million. This marked the company’s third consecutive quarter of revenue growth after four successive quarters of sales declines. The top line also beat the Zacks Consensus Estimate of $271 million.
The revenue growth was driven by robust sales of the latest Hero5 cameras, Karma growth and strong accessory revenue. Further, more than half of the revenue came from overseas. On a year-over-year basis, the APAC region boasted the strongest revenue growth at 67%.
HERO5 Black was the best-selling digital imaging device in units and dollars in the U.S. for the second consecutive quarter. Further, Karma was the second best-selling drone brand in the U.S. in the second quarter. Karma was recently launched in international markets, including the UK, Germany, France, Korea and Japan.
For the quarter, R&D expenses were down 40.4% year over year. In addition, sales and marketing expenses plunged 33.2% year over year.Second-quarter operating expenses came in at $156.8 million, down 35.5% year over year.
Non-GAAP gross margins contracted 620 bps year over year to 36.2%. Non-GAAP operating loss came in at $9.3 million, down 89.6% from $89.3 million generated last year.
The company focused on improving inventory and channel management, which resulted in a 39% reduction in inventory sequentially, and forward weeks of supply in the channel are down 25%. This bodes well for GoPro’s upcoming product launches.
Restructuring
GoPro has been aggressively cutting costs in recent timesthrough a series of layoffs and revealed plans to cut 270 jobs in March this year. Last year, the company conducted two rounds of layoffs, cutting 7% and 15% of its workforce in January and November, respectively. GoPro also shuttered its entertainment and media business as part of its restructuring.
GoPro also shifted most of its software development to a more economical location like Romania, while its customer support and administrative services have been moved to the Philippines. The company streamlined the supply chain and also made changes to its product packaging and shipping.
GoPro believes that its restructuring efforts will help it bring down full-year GAAP operating expenses below $585 million and non-GAAP operating expenses below $495 million. The company also assured that it would bring down operating expenses by over $200 million and return to EBITDA profitability in 2017.
In addition, it affirmed that these cost-cutting efforts will not interfere with its pipeline of hardware and software product launches.
Notable Developments
The company rolled out QuikStories (a new GoPro App feature) last month, which automatically pulls footage from a HERO5 camera and creates ready-to-share videos on the user’s phone. QuikStories creates polished, shareable videos featuring customizable music, filters and effects. The company is highly optimistic about this product and expects it to become a game changer.
In April, GoPro announced the development of Fusion, a 5.2k spherical camera that is designed to be capable of capturing both virtual reality and standard video and picture.Along with the new camera, a pilot program is being conducted for Fusion, allowing professional content creators to gain early access to the camera and provide feedback.Fusion is scheduled to be on the market by the end of 2017 and will likely be available in the holiday season to boost sales.
Liquidity
Exiting the quarter, the company had cash and cash equivalents of $149.8 million, down significantly from $192.1 million as on Dec 31, 2016.
Guidance
In light of a relatively strong quarter, the company gave a decent guidance for third-quarter 2017. It projects revenues of about $300 million (+/- 10 million) for the quarter. The company expects gross margin to be 37% (+/- 1%).
For full-year 2017, GoPro plans to limit its non-GAAP operating expenses in 2017 to $495 million, in an attempt to try to return to full-year profitability. This is comparable to a 2016 figure of about $709 million.
GoPro should be able to attain these massive cost reductions, in light of its recent job cuts and business restructuring, which did away with many high-cost operations, including its entertainment division.
It is likely that GoPro’s sales will gradually improve, as it ramps production and Karma gains traction in international markets. This will supplement the company’s cost-reduction initiatives and enable it to achieve sustained, profitable growth.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter In the past month, the consensus estimate has shifted up by 52.3% due to these changes.
GoPro, Inc. Price and Consensus
GoPro, Inc. Price and Consensus | GoPro, Inc. Quote
VGM Scores
At this time, the stock has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.