What to watch for in GoPro’s earnings
By Jennifer Booton
MarketWatch
Published: July 20, 2015 1:30 p.m. ET
GoPro has topped earnings estimates in every quarter since IPO
GoPro Inc. is set to report second-quarter earnings after the market closes Tuesday.
The company is expected to report robust demand for the Hero4 action camera and deliver earnings above expectations. However, longer-term market saturation worries continue to haunt the hardware company, and analysts will be looking for signs GoPro GPRO, +0.25% is expanding deeper into content production after a number of strategic hires and acquisitions in the first half of 2015.
Here’s what to expect:
Earnings: Analysts expect GoPro to report adjusted earnings per share of 26 cents, up from eight cents in the year-earlier period, and an improvement of two cents from the prior quarter. Estimize, a fast-growing software platform that uses crowdsourcing to garner earnings estimates from hedge fund executives, brokerages, sell-side and buy-side analysts, has GoPro earning 29 cents a share. The company has surpassed Wall Street estimates in every quarter since its June 2014 initial public offering.
Revenue: Sell-side analysts expect GoPro to report revenue of $395 million, according to FactSet, up from $245 million in the same period last year. Contributors on Estimize are forecasting revenue of $401 million. Like EPS, GoPro has surpassed revenue estimates in every quarter.
Stock reaction: Shares of GoPro have climbed more than 33% in the last three months, fueled by news that the company is building a quadcopter and getting into virtual-reality film equipment and software. It jumped 5.1% to $59.52 in Monday afternoon trade. However, GoPro is still off from the Oct. 7 high of $93.85. The average rating on GoPro’s stock is the equivalent to buy, according to a FactSet poll of 15 analysts. The average price target is $69.08.
What to watch for: GoPro has been working to differentiate beyond its traditional action cameras. Last week, Barclays upgraded the stock to overweight citing new products and strategic acquisitions, including the purchase of virtual reality software company Kolor. GoPro also recently announced the Session camera, its smallest camera and the first that is completely waterproof.
Barclays gave a nod to GoPro’s recent string of strategic media hires, including Zander Lurie, formally of CBS and Guggenheim Media; and Charlotte Koh, previously from Hulu, saying it highlighted the company’s focus on content and production. Content, mixed with GoPro’s hardware and editing tools, could produce “an interesting avenue for brand extension” for GoPro, it said.
However, Pacific Crest analyst Brad Erickson, who rates GoPro at sector weight, said he doesn’t think the new products on their own will shake away bearish concerns. “Response to new products is lukewarm,” he said in a note to clients.
While Erickson expects GoPro to report another better-than-expected quarter — its fifth in a row — he said recent checks with suppliers indicate demand for its cameras remains steady but “not excessively high.” Still, he raised his earnings per share estimate for 2016 by 10 cents to $1.98 and forecast that GoPro will sell 170,000 drones next year, translating to roughly $90 million in revenue.
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