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GoPro to Move Most of U.S.-Bound Camera Production Out of China

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To counter the potential impact of any new tariffs in the wake of the ongoing American-Sino trade war, GoPro, Inc. (GPRO - Free Report) recently announced that it is planning to move the production of most of its U.S.-bound cameras out of China by the summer of 2019. However, cameras bound for other countries will continue to be produced in China. The company has not specified where production of U.S.-bound cameras will go.

Management believes that it would be judicious to move manufacturing out of China to minimize costs or cope with potential tariffs. Such a diversified approach will help the company to expand its business irrespective of tariff implications. Although GoPro’s manufacturing partner provides facilities, the company owns its production equipment and therefore expects to make this move at a relatively low cost.

With intensifying competition, GoPro is trying to drive demand for its cameras. Also, it aims to maintain its competitively priced product line up to increase market share globally.

Notably, the company’s flagship camera, HERO7 Black, witnessed record levels of social engagement at launch and achieved the highest week-one retail unit sales in the company's history. It intends to accelerate the growing sales momentum with future product launches at a relatively cheaper price. GoPro will showcase its HERO7 line of cameras, including the best-selling $399 HERO7 Black camera, at CES in Las Vegas from Jan 8 to Jan 11 next year.

However, the stock has underperformed the industry with an average loss of 22.5% compared with a decline of 11% for the latter in the past three months. It remains to be seen if such strategic moves will help the company improve profitability in the future.


 

GoPro currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader industry include Sony Corp. (SNE - Free Report) , Callaway Golf Co. (ELY - Free Report) and Clarus Corp. (CLAR - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.               

Sony has a long-term earnings growth expectation of 10.1%. It surpassed earnings estimates in three of the trailing four quarters, the average positive surprise being 44.7%.

Callaway has a long-term earnings growth expectation of 25%.

Clarus has a long-term earnings growth expectation of 10%.

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