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GoPro (GPRO) Q2 Preview: An Earnings Beat in the Cards? - Analyst Blog

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GoPro, Inc.GPRO is slated to report its second-quarter 2015 results on Jul 21. In the prior quarter, the company delivered a positive earnings surprise of around 37.5%.

Gopro's track record has been pretty good over the past few quarters with the company beating earnings estimates in three of the last four quarters. The average earnings surprise over the last four quarters is 118.65%.

Let's see how things are shaping up for this announcement.

Factors to Consider

In the last three months, GoPro stated the motive of transforming itself from the 'camera maker' to 'content maker'. The company, thus, has been developing various types of software solutions and hardware to curtail the complexity of managing, editing and sharing contents on different media platforms. To attain this dream, the company launched a six-camera spherical array in alliance with tech-giant Google Inc. GOOG that is in its pipeline. Additionally, GoPro disclosed that it foraying into the air-born equipment market, with its own quadcopter drone to be launched in the first half of 2016.

Additionally, GPRO hit the broadcast market with the launch of a portable, high cost-efficient wireless HD micro transmitter, HEROCast. Developed at par with GoPro's standards, this lightest transmitter will enable the company's flagship camera line to broadcast live, HD wireless video for the first time.

On the other hand, keeping alive its momentum of product launch related to its flagship HERO cameras range, GoPro came up with an entry-level camera - HERO+ LCD. The product, which started sell-off in June, is relatively lower priced and has a host of advanced features. We expect this new camera of GoPro to delight users and boost its revenue stream in the quarter.

However, GoPro has huge international market exposure, with 57% of its revenue generated outside the U.S. in first-quarter 2015. Additionally, the company operates in a highly competitive cameras and camcorders markets, which has an extensive presence of well-known camera makers. Hence, these remain among the major concerns.

Earnings Whispers?

Our proven model does not conclusively show that GoPro will beat earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP : Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a 14 cents. This leads to an earnings ESP of 0.00% for GoPro.

Zacks Rank : GoPro's Zacks Rank #1 when combined with a 0.00% ESP lowers the predictive power of ESP and makes surprise prediction difficult.

Notably, we caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Align Technology Inc. ALGN , earnings ESP of +2.63% and Zacks Rank #2.

Cal-Maine Foods, Inc. CALM , earnings ESP of +5.17% and Zacks Rank #1.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ALIGN TECH INC (ALGN): Free Stock Analysis Report

GOPRO INC-A (GPRO): Free Stock Analysis Report

CAL-MAINE FOODS (CALM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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