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Why Is GoPro (GPRO) Up 44.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for GoPro (GPRO - Free Report) . Shares have added about 44.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is GoPro due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

GoPro Q1 Earnings Meet Estimates, Withdraws 2020 View

GoPro reported unimpressive first-quarter 2020 results, with the bottom line and top line deteriorating on a year-over-year basis. However, direct-to-consumer operating model and accretive subscriber base were tailwinds amid the COVID-19 crisis.

Net Loss

On a GAAP basis, net loss in the March quarter came in at a loss of $63.5 million or 43 cents per share that is wider than a loss of $24.4 million or 17 cents per share in the year-ago quarter. The year-over-year deterioration was primarily caused by lower revenues and income tax expenses in the reported quarter.

Quarterly non-GAAP net loss came in at a loss of $49.6 million or 34 cents per share compared with a loss of $10.2 million or 7 cents per share in the year-ago quarter. The bottom line met the Zacks Consensus Estimate.

Revenues

GoPro generated revenues of $119.4 million, down 50.8% from $242.7 million in the year-ago quarter. In spite of in line preliminary results, the year-over-year decline in revenues was mainly caused by adversities induced by the COVID-19 pandemic. Nevertheless, the company witnessed an upward sell-through trend of GoPro Cameras amid this crucial hour. Also, the top line met the consensus estimate.

Markedly, GoPro’s Plus subscription service ended the reported quarter with 355,000 paid subscribers, up 69% from the prior-year quarter’s figure. Further, the organic viewership of GoPro content reached a record quarterly high of 243 million, up more than 40% from the year-ago quarter’s level.

Revenues from Americas came in at $57.3 million (47.9% of total revenues), down 47.5% from $109.1 million in the year-ago quarter. Revenues from EMEA were $29.7 million (24.9%), down 58.1% from $70.9 million and APAC generated $32.4 million (27.2%), down 48.3% from $62.7 million.

Revenues from Direct channel were $64.9 million (54.3% of total revenues), down 41.5% from $110.9 million. Revenues from Distribution channel came in at $54.5 million (45.7%), down 58.6% from $131.8 million year over year.

GoPro shipped 341,000 camera units during the reported quarter, down 59.5% year over year. The company had $172 million in inventory compared with $119 million in the year-ago quarter. Non-GAAP gross margin remained flat at 34.2% from the prior-year quarter’s level, driven by the implementation of direct-to-consumer operating model. Impressively, cameras with prices above $300 contributed nearly 90% to revenues in the reported quarter.

Cash Flow & Liquidity

During the first three months of 2020, GoPro utilized $68.3 million of net cash for operating activities compared with $65 million of cash utilization in the year-ago quarter. As of Mar 31, 2020, the company had $117.4 million in cash and cash equivalents with $151.4 million of long-term debt.

2020 Guidance Withdrawn

Thanks to the uncertainties pertaining to the COVID-19 crisis, GoPro has withdrawn its 2020 financial guidance. Currently, GoPro is undertaking direct-to-consumer growth initiatives with an effective operating business model. Consequently, this restructuring will result in an estimated charge of $31-$49 million.

Although the action video camera maker’s global distribution network has been severely impacted by the COVID-19 pandemic, the company stated that any kind of operational changes will not impact its 2020 product roadmap, which includes new hardware, software and subscription products. That said, the company will continue to sell its products to select leading retailers in key regions where consumers still prefer offline purchase. Notably, GoPro believes that a more direct-to-consumer-centric approach is better aligned with the present business climate as well as accretive to the average selling price of products and gross margin. This, in turn, will enable the company to position itself well when demand begins to normalize amid this hour of crisis.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -23.81% due to these changes.

VGM Scores

Currently, GoPro has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

GoPro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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