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GoPro (GPRO) Up 11.7% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for GoPro, Inc.GPRO . Shares have added about 11.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is GPRO 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 Reports Loss in Q1, Revenues Beat Estimates

GoPro reported first-quarter 2018 adjusted loss of 34 cents per share, narrower than the Zacks Consensus Estimate of a loss of 40 cents per share.

On a GAAP basis, the company reported a loss of 55 cents for the quarter, compared with a loss of 78 cents in the year-ago period.

The company posted better-than-expected revenue numbers for the quarter and also reduced its operating expenses significantly on a year-over-year basis.

Inside the Headlines

Total revenues in the quarter came in at $202.3 million, down 7.8% on a year-over-year basis. However, the figure trumped the Zacks Consensus Estimate of $175.4 million.

Notably, the year-over-year decline in revenues was partially offset by robust sales of the company's HERO5 Black and HERO6 Black products along with the launch of its latest entry-level HERO camera.

Notably, GoPro was the best-selling camera in the overall digital imaging category in North America for seventeenth consecutive quarter. The company remains optimistic about its prospects in end markets mainly on account of enhanced marketing programs, expense control measures, improving channel management as well as upcoming product launches.

For the quarter, R&D expenses were down 23% year over year. Additionally, sales and marketing expenses declined 27.5% year over year. First-quarter total operating expenses came in at $119.7 million, down 23.7% year over year.

Non-GAAP gross margins contracted 800 bps year over year to 24.3%. Non-GAAP operating loss came in at $44.5 million, down 26.2% from $60.3 million incurred last year.

Restructuring Measures

GoPro has been aggressively cutting costs in recent times through layoffs. Last year, the company conducted two rounds of layoffs, retrenching 7% and 15% of its workforce in January and November, respectively. GoPro also shuttered its entertainment and media business as part of the restructuring last year.

For 2018, the company has a target to limit operating expenses to below $400 million compared with $476 million incurred in 2017. A large part of the reduction can be attributed to the company's decision of exiting its drone business and reducing employee headcount.

Notable Developments

Last month, the company rolled out an entry-level HERO camera that is designed to capture impressive videos and pictures. The new camera will enable users to share experiences that are difficult to get through a phone. Featuring a 2-inch touch display, the camera is waterproof up to 30 feet. This makes it extremely durable and ideal for kids, adventurers, social sharers and travellers alike.

In March, the company announced a global, equipment license and multi-year technology agreement with Jabil Inc. The collaboration will make innovative, GoPro enabled products and services available from some of the well-known hardware and software companies. The collaboration will encompass a range of products and services offered by each company including certain digital imaging as well as consumer products.

Liquidity

Exiting the quarter, the company had cash and cash equivalents of about $105 million, up significantly from $74.9 million as on Mar 31, 2017.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter.

GoPro, Inc. Price and Consensus

GoPro, Inc. Price and Consensus | GoPro, Inc. Quote

VGM Scores

At this time, GPRO has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. The stock was allocated a grade of F on the value side, putting it in the bottom 20% 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.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise GPRO has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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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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