GoPro Inc Q3 Earnings Preview: Bearish Sentiment Could Work In Its Favor

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Action camera maker GoPro is set to report its fiscal third-quarter results on Wednesday, Oct.28 after the market close. The stock has declined more than 53% in the last three months due to the not-so-strong traction of its products. However, GoPro has exceeded Wall Street expectations in every quarter since going public last year. Will GoPro beat analysts’ projections this time?

GoPro’s Q3 revenue expected to jump 55%

Analysts on average expect the San Mateo-based company’s Q3 sales to jump 55% YoY to $433 million. Earnings are estimated at 29 cents per share, up from 12 cents in the same quarter a year ago. GoPro had guided Q3 revenues between $430 million and $445 million with EPS between 29 cents and 32 cents, and gross margins of 46%. Analysts’ estimates are at the bottom end of the company’s projections. But JPMorgan analyst Paul Coster said in a research note last week that the exceedingly bearish sentiment on GoPro could work in favor of the company following Q3 results.

Analysts have grown more cautious on GoPro in recent weeks. The company’s tiny Hero4 Session failed to meet expectations. Subsequently, GoPro had to drop its price by $100. Its best-selling cameras remain Hero4 Silver and Black editions that are over a year old. Pacific Crest Securities analyst Brad Erickson recently said his checks suggest that GoPro’s sell-through has been declining.

Analysts offer a grim Q4 forecast

Earlier this month, Morgan Stanley slashed its price objective on the stock from $62 to $35, citing disappointing sales of Hero4 Session. Even bigger concern is the holiday season sales. Holiday sales drive about 40% of the company’s revenue. This year, analysts expect GoPro’s Q4 revenue to rise only 9% over last year. That’s a disappointing estimate for a company that has registered above 50% growth in the past. Wall Street expects GoPro to bounce back next year, riding on the new product launches and drones.

GoPro shares jumped 2.62% to $28.97 at 10:29 AM EDT on Wednesday.

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About the Author

Vikas Shukla
Vikas Shukla has a strong interest in business, finance, and technology. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com or on Twitter @VikShukla10

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