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GoPro's (GPRO) Q2 Loss Narrower Than Expected, Revenues Beat

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GoPro, Inc. (GPRO - Free Report) reported second-quarter 2018 adjusted loss of 15 cents per share, narrower than the Zacks Consensus Estimate of a loss of 22 cents.

On a GAAP basis, the company incurred a loss of 27 cents compared with a loss of 22 cents in the year-ago period.

The company posted better-than-expected revenue numbers for the quarter and also reduced its operating expenses significantly on a year-over-year basis.

Inside the Headlines

Total revenues came in at $282.7 million, down 4.7% on a year-over-year basis. However, the figure trumped the Zacks Consensus Estimate of $271.7 million.

Notably, the year-over-year decline in revenues was partially offset by robust sales of the company’s GoPro Fusion products, particularly in the United States, and the continued solid sales of HERO5 Black products.

GoPro, Inc. Price, Consensus and EPS Surprise

 

GoPro, Inc. Price, Consensus and EPS Surprise | GoPro, Inc. Quote

Notably, GoPro was the best-selling camera in the overall digital imaging category in North America for 18th consecutive quarter. The company remains optimistic about its prospects mainly on account of strong demand for its products in end markets.

For the quarter, R&D expenses were down 31.2% year over year. Sales and marketing expenses were up 6.3%. Second-quarter total operating expenses came in at $114.2 million, down 12.6%.

Non-GAAP gross margins contracted 540 basis points year over year to 30.8%. Non-GAAP operating loss came in at $16.7 million, up 80.7% from $9.3 million incurred last year.

Restructuring Measures

For 2018, the company has a target to limit operating expenses below $400 million. A large part of the reduction can be attributed to the company’s decision of exiting its drone business and reducing employee headcount.

Liquidity

Exiting the quarter, the company had cash and cash equivalents of about $114.8 million, down significantly from $149.8 million as of Jun 30, 2017.

For the first six months of 2018, net cash used in operating activities was $98.2 million compared with $149.4 million in the prior-year period.

Our Take

GoPro has been aiming toward transforming itself from the ‘camera maker’ to ‘content maker’ and has taken significant steps to diversify into higher-margin businesses including video editing and virtual reality. The company announced measures to turn its business around in 2018, including intense restructuring and streamlining of its supply chain. The company is committed to recapturing growth, with a slimmer camera portfolio, a clean distribution channel and interesting product launches like Hero6.

However, the fact remains that, the company reaps majority of its revenues from capture devices and hence, faces a high product concentration risk. Moreover, the company has been witnessing huge competition between its new and old products.

Zacks Rank & Stocks to Consider

GoPro currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are G-III Apparel Group, LTD. (GIII - Free Report) , AMC Networks Inc. (AMCX - Free Report) and Pool Corporation (POOL - Free Report) . While G-III Apparel Group sports a Zacks Rank #1 (Strong Buy), AMC Networks and Pool Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group surpassed estimates in each of the trailing four quarters with an average beat of 190.81%.

AMC Networks exceeded estimates thrice in the trailing four quarters with an average beat of 19.59%.

Pool Corporation surpassed estimates thrice in the trailing four quarters with an average beat of 7.75%.

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