GoPro Inc (NASDAQ:GPRO) is scheduled to report its financial results for the third quarter on Thursday, October 30. Analysts at J.P Morgan North America Equity Research expected that the quarterly results of the sports camera maker could meet or beat the consensus estimates.
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In a note to investors, J.P. Morgan analysts Paul Coster and his colleagues emphasized that the sales of GoPro Inc (NASDAQ:GPRO) for the third-quarter were sustained by expanding channel, deepening media ecosystem and growing awareness about the company. GoPro’s IPO branding event helped boost awareness.
“Overall, we think GoPro is executing well, probably ahead of consensus expectations, however the stock, trading at 68 times our CY15 PF EPS, already anticipates robust results, so we are reluctant to buy the stock at these levels, but look for pull-backs as a potential entry-point,” said Coster and his fellow analysts.
Earnings estimate for GoPro
For the third quarter, the Coster and his fellow analysts estimated that GoPro Inc (NASDAQ:GPRO) would be able to report $0.08 in earnings per share on $265 million revenue.
Coster and his colleagues estimated that the company’s revenue would increase 38% year-over-year with camera unit sales of 948K and an average ASP of $226.
The sports camera maker expected that it could deliver PF earnings in the range of $0.06 per share and revenue of around $255 million to $265 million. Wall Street analysts have a consensus estimate of $0.08 in earnings per share on $264 million in revenue.
Its PF gross margin was expected to be around 41.6% and PF operating margins at 6.6%.
GoPro Inc (NASDAQ:GPO) “may have been under-earning in 3Q, owing to thinning out of the channel to make way for the Hero 4 product announced at the beginning of 4Q,” according to Coster and his fellow analysts.
For the fourth quarter, the analysts expected GoPro Inc (NASDAQ:GPRO) to achieved PF earnings of $0.49 per share on $500 million in revenues compared with the consensus estimate of $0.53 per share on $499 million in revenues.
Coster and his team expected initial increase in the sales of HERO 4 camera followed by a steady level of sales. A surge in HERO 4 sales is expected to start on Black Friday heading into the holiday shopping season. The analysts also expected the company’s ASP to trend higher during the fourth quarter.
Analyst expected near-term volatility for GoPro to remain high
Coster and his colleagues also suggested that the near-term volatility for the shares of GoPro Inc (NASDAQ:GPRO) would remain elevated due to positive headlines, thin liquidity, high short-interests.
The ebb and flow of discussions about the issue on how to value strong growth stocks the lack trading comparable would also contribute to GoPro’s near-term volatility.
The analysts also emphasized that the fourth quarter could be “very strong” for GoPr Inc (NASDAQ:GPO) and the CES could be a “positive catalyst” early on January. Coster and his team suggested investors to hold long-term positions and perspective on the stock. Investors were also advised to look for pull-backs to add to their stake.
J.P. Morgan maintained a Neutral rating for the shares of GoPro Inc (NASDAQ:GPRO) with a price target of $56 per share. The stock closed $80.92 per share, up by 6.47% on Tuesday.