GoPro’s earnings results for the holiday shopping quarter may indicate a mix shift toward the company’s least expensive camera. The action camera maker released the low-priced HERO camera to target the broader video camera market, and Wedbush analysts say their checks suggest it is the HERO that’s “the gift of choice this Christmas.”
GoPro wins big with entry-level HERO
In a report dated Dec. 22, 2014, analysts Michael Pachter, Nick McKay and Alicia Reese said their team surveyed sales associates at 86 different stores, including 32 Bet Buy stores, 27 Target stores and 27 Wal-Mart stores. They asked about demand and inventory of GoPro’s three newest cameras, the HERO, the HERO4 Silver and the HERO4 Black.
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The analysts said the $130 HERO seems to be the most popular camera of the three, although it’s unclear just how much inventory was initially supplied. They discovered that the HERO was sold out at 30 of the Best Buy stores, 26 of the Target stores and 20 of the Wal-Mart stores they surveyed.
They reported anecdotal reports from sales associates at the stores who said the HERO was the most popular of all of GoPro’s cameras. They reported that each time shipments of the HERO came in, they sold out quickly. The Wedbush team also reported that the HERO is sold out on Amazon, GoPro.com, Target.com and Walmart.com, although it is available at BestBuy.com.
Some were worried that the HERO’s lack of 4K capability would hurt sales, but the Wedbush team said this apparently isn’t the case because many consumers don’t even have 4K TVs or computer monitors to view the ultra-high quality video anyway.
GoPro’s HERO Silver also does well
The Wedbush analysts added that GoPro also is having success with the HERO4 Silver, as it sold out at 44 of the Target and Wal-Mart locations they surveyed. They think the built-in LCD screen drove sales of the $400 camera, as it is an exclusive feature in GoPro’s product line.
They suggest other reasons the HERO4 Silver did so well was because it was the high-end option at Target and Walmart, which don’t carry the HERO4 Black, and because demand for the HERO outstripped supply. The analysts say Best Buy had higher inventory levels of the HERO4 Silver than they thought the company’s stores would, but they think this was due to overstocking before Christmas and that most of the cameras would sell through by Christmas.
Other results from the GoPro checks
The Wedbush team also reported that the HERO4 Black was in stock at 24 of the Best Buy stores they surveyed. They cited overstocking as a reason in some cases, and the view that the camera is just a niche product as another reason.
Overall, they say GoPro’s products in general seem to be selling well, and they believe the camera maker will surpass the high end of its revenue guidance for the holiday quarter. GoPro guided for revenue of between $550 million and $580 million.
GoPro expected to beat guidance
They say if revenue per unit increases 10% year over year in the fourth quarter just as it did in the previous quarter, it would rise to $280. That would mean GoPro would have to ship between 1.96 million and 2.07 million cameras to achieve its revenue guidance range. That would be an increase from the 1.42 million units GoPro sold in last year’s fourth quarter.
The Wedbush team is projecting at least an increase that’s at least 15% higher than the implied guidance for unit sell-in this year. They say even though the HERO’s lower price could have a negative impact on the blended average selling price, they think the total number of units and introduction of the new $500 camera will push GoPro’s top-line result over guidance by at least 15%. They also expect the camera maker to beat its guidance of between 65 cents and 69 cents per share in earnings for the current quarter.
The firm maintained its Outperform rating and $98 per share price target on GoPro. Shares of the company’s stock rose nearly 5% during regular trading hours today.
