GoPro (GPRO) Down 23.1% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for GoPro (GPRO). Shares have lost about 23.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is GoPro due for a breakout? 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 drivers.

GoPro Misses Earnings & Revenue Estimates in Q2

GoPro reported lower-than-expected second-quarter 2019 results, wherein both the top line and the bottom line missed the respective Zacks Consensus Estimate. However, the action video camera maker’s performance was largely driven by strong demand for HERO7 cameras and diligent execution of operational plans. Lower operating expenses and inventory management also acted as tailwinds.

Net Loss

On a GAAP basis, net loss for the June quarter was $11.3 million or loss of 8 cents per share compared with net loss of $37.3 million or loss of 27 cents per share in the year-ago quarter. The year-over-year improvement was primarily due to top-line growth and lower operating expenses.

However, non-GAAP net income came in at $4.2 million or 3 cents per share against net loss of $20.8 million or loss of 15 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by a penny.

Revenues

GoPro generated quarterly revenues of $292.4 million, up 3.4% year over year with growth in all geographic regions. The top line, however, lagged the consensus estimate of $301 million.

The company shipped 1.1 million camera units during the reported quarter, up 1% year over year. This was mainly due to solid demand for the flagship HERO7 Black camera, which accounted for more than 85% of total camera revenues.

Cash Flow & Liquidity

GoPro utilized $66 million of net cash in operating activities during the first six months of 2019 compared with cash utilization of $100.6 million in the year-ago period. As of Jun 30, 2019, the company had $91.3 million in cash and equivalents with $143.8 million of long-term debt.

Going Forward

GoPro expects to translate the healthy momentum and controlled cost in its business into growth and profitability through 2019 and beyond. The company is optimistic about its prospects, mainly on account of strong demand for its products in end markets. It plans to enhance its Plus subscription service through enhanced benefits and user awareness and aims to work more closely with its retail partners, both in North America and abroad.

GoPro is also making investments in merchandising and retail advertising to drive bigger brand presence while continuing to innovate. It intends to expand footprint in emerging markets like India and is focused on scaling its CRM efforts to augment customer base.

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months. The consensus estimate has shifted -25% due to these changes.

VGM Scores

Currently, GoPro has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 B. 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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