GoPro Earnings Preview: Upward Revisions Expected

GoPro Earnings Preview: Upward Revisions Expected
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JPMorgan analysts are projecting earnings of 69 cents per share on $580 million in revenue for GoPro’s December quarter

GoPro is scheduled to release its next earnings report on Feb. 5, and analysts are expecting quite a bit. Most firms seem to agree that the action video camera manufacturer had a very merry holiday shopping season.

GoPro sees strong demand

GoPro launched the new Hero4 line of cameras just in time for the holidays, so it benefited not only from seasonal but also first-time demand for the new cameras, according to JPMorgan analysts Paul Coster, Paul Chung and Mark Strouse. In a report dated Jan. 29, they said that their intra-quarter channel checks indicated that demand was strong all across the U.S.

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They found particularly strong performance along the U.S. coast and stated that product mix seemed to be skewed toward the Hero4 Black and Silver editions. As a result, Coster and team thinks there could be upside to their estimates.

Expectations for GoPro’s fourth quarter earnings

The JPMorgan team is projecting pro-forma earnings of 69 cents per share on $580 million in revenue. That’s at the top end of GoPro’s guidance, which was for earnings between 65 cents and 69 cents per share and revenue of between $550 million and $580 million.

They’re expecting to see GoPro’s unit shipments rise by about 43% year over year to 2 million. They said their checks of the company’s channel after the Oct. 5 launch of the Hero4 line indicated that stock-outs were skewed toward the Black edition, which is more expensive than the other models. They also found demand remained strong in the middle of the quarter, picking up in the South and Midwest.

They’re projecting an 11% increase in average selling prices to $253 due to the product mix being skewed toward the mode expensive Hero models. They want to see gross margins rise 240 basis points to 44.1% and operating margins rise “significantly” to 25.5%. The JPMorgan team reiterated its Overweight rating and $70 per share price target going into next week’s earnings report.

GoPro’s cameras still seeing strong demand

Demand for GoPro’s cameras may even have continued this month after the holiday shopping season was over, according to analysts at Morgan Stanley. In their report also dated Jan. 29, analysts James Faucette, Meta Marshall and Yuuji Anderson said their channel checks suggest GoPro could meet or exceed expectations for the current quarter.

They noted that they did see the expected seasonal decline in January but said sell-through rates continued to be strong. In fact, they think that in this month alone, GoPro may have sold more than 500,000 cameras, compared to their estimate of 1 million units in all of December. They’re projecting shipments of 1.1 million units in the current quarter. The Morgan Stanley team noted that they found fewer stock-outs this month but said most of the retailers they talked to required shipments from GoPro weekly to keep up with demand.

Like JPMorgan, Morgan Stanley expects earnings of 69 cents per share for the December quarter. They’re predicting lower revenue, however, coming in at $572 million. For the current quarter, they’re projecting earnings of 17 cents per share and revenue of $323 million. They maintained their Equal-weight rating and $57 per share price target on GoPro, although they see the potential for upside to their estimates.

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