Why Is GoPro (GPRO) Up 11.7% Since Last Earnings Report?

It has been about a month since the last earnings report for GoPro (GPRO). Shares have added about 11.7% 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’s Q3 Earnings Beat Estimates

GoPro reported third-quarter 2023 non-GAAP earnings of 4 cents per share, which outshined the Zacks Consensus Estimate by 100%. The company reported earnings of 19 cents in the year-ago quarter.

GoPro generated revenues of $294.3 million, down 4% from the year-ago levels. However, the top line beat the consensus mark by 4.7%.

Managements now expects 2023 revenues and unit sales to be ahead of its earlier guidance, which was provided during the second quarter of 2023 earnings call. Revenues are anticipated to be $1.04 billion (+/-$5 million) compared with the prior projection of $1.03 billion (+/-$30 million).

Quarter in Details

GoPro shipped 923 million camera units during the reported quarter, up 16% year over year.

It recorded 2.5 million subscribers, marking 20% year-over-year growth at the end of the quarter under discussion. Management envisions subscribers at 2023 end to be between 2.5 and 2.6 million, with additional subscriber growth in 2024.

Region-wise, revenues from the Americas totaled $131.6 million (44.7% of total revenues), down 6% from the prior-year levels. Revenues from Europe, the Middle East and Africa were $83.5 million (28.4%), declining 2% year over year. The Asia Pacific generated revenues of $79.2 million (26.9%), down 2% on a year-over-year basis.

Based on channels, revenues from GoPro.com of $63.3 million (21.5% of total revenues) plunged 36% year over year. Our estimate was pegged at $67.7 million.

In this channel, hardware revenues totaled $38.5 million compared with $77.2 million in the previous-year quarter. Subscription revenues amounted to $24.8 million, climbing 15.9% year over year.

Retail channel registered revenues of $231 million (78.5%), which improved 12% from the year-ago levels. The uptick was driven by strategic pricing action, increasing retail doors and retail efforts including merchandising. We suggested the metric to be $213.1 million.

Management added that it was ahead of its target of opening 2,000 new retail doors globally, with 2,500 already opened. By 2024, it is aiming to open more than 3,000 new retail doors worldwide. This will bring the total count to approximately 25,000, representing an increase of more than 30% from the initiation of growth strategy in May 2023.

The company had $154.9 million in inventory compared with $153.4 million in the year-earlier quarter.

Other Details

Gross profit of $94.2 million decreased 18.8% year over year. Total operating expenses of $98 million rose 7% year over year. Operating loss totaled $3.7 million against operating income of $24.4 million in the prior-year quarter.

Non-GAAP gross margin came in at 32.2% compared with 38.2% in the year-ago quarter mainly due to higher demand for current lower-margin entry-level cameras. Entry-level products accounted for 19% of camera revenues in the third quarter.

Adjusted EBITDA was $7.2 million compared with $35.2 million a year ago.

Cameras with suggested retail prices at or above $400 contributed 75% to revenues in the reported quarter compared with 87% in the prior-year quarter.

Cash Flow & Liquidity

In the quarter under review, GoPro used $1.6 million of net cash from operating activities against $40.7 million of cash generated from operations in the year-ago period.

As of Sep 30, the company had $220.9 million of cash and cash equivalents with $141.7 million of long-term debt. GoPro repurchased 2.6 million shares worth $10 million.

Guidance

For the fourth quarter of 2023, revenues are estimated to be $325 million (+/- $5 million).  Non-GAAP adjusted earnings are forecast to be 2 cents per share (+/- 1 cent). Gross margin is anticipated to be 33% (+/- 50 basis points). Street ASP is projected to be nearly $335.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -72.73% due to these changes.

VGM Scores

At this time, GoPro has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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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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