GoPro shares tumbled today as the countdown to the company’s next earnings report tonight after closing bell ticked on. The stock pulled back by as much as 2.37% to $11.13 per share as analysts warned investors to expect steep year over year sales declines.
Wall Street expects GoPro to report $181 million in sales, and -$96 million in adjusted EBITDA, and management guided for sales of $160 million to $180 million in sales and -$97.5 million to -$92.5 million in adjusted EBITDA. Analysts are also looking for adjusted losses of 60 cents per share, compared to last year’s adjusted profit of 24 cents per share.
What to expect in GoPro’s earnings report
Management also guided for full-year sales of $1.35 billion to $1.5 billion, and Stifel analyst Jim Duffy, who has a Hold rating on GoPro stock, expects them to reiterate this guide. He believes the headwinds the action camera maker has been dealing with over the last several quarters continued during the second quarter. He also expects the company’s operating expenses to increase gradually throughout this year and noted that it set the expectation that management may no longer provide forward quarter guidance and that annual guidance will only receive updates when needed.
Duffy and team said this year they’re looking for more details on the upcoming Karma quadcopter as a probably sales driver for this year. Also the HERO5 is expected to be launched this year, with past announcements coming in early October ahead of a holiday season launch. However, the Stifel team warns that if the device isn’t compelling enough to trigger a fresh upgrade cycle and/ or attract new buyers, management’s sales outlook might not be achievable.
They believe GoPro will continue operating at a loss and burning cash for the next two years and doing so “purposely” for the purpose of pursing “a multi-year vision. They do think it’s possible that the company will become profitable again by becoming more conservative on expenses, however, and they see value in the company’s brand.
GoPro tries to come back from missteps
Wedbush analyst Michael Pachter and team note that GoPro has a lot to prove now as management is following up a series of “high-profile missteps” like the HERO4 Session, which was very unpopular, and the lack of a new HERO at the end of last year. The company also negatively preannounced results in January, and they believe this year is an inflection point for its stock. Wedbush has an Outperform rating and $13 per share price target on GoPro stock.
Pachter and team think the bar has been set pretty low, so they expect the results to be within the guidance range. They said at this point, they’re “willing to give GoPro the benefit of the doubt,” and they see room for upside if the Karma and HERO5 do well. They note that the company has an installed base of about 20 million devices, and if the Karma meets consumers’ expectations, they believe it will penetrate 1% or more of that installed base per quarter. This suggests that the company could sell 150,000 to 200,000 drones per quarter, which would put the full-year sales guidance within reach.
However, if GoPro puts off the release of the Karma to the second half of the year, they expect another selloff in its stock and a reduction in the $252 million sales consensus for the second quarter. The Wedbush team notes also that the company has historically kept quiet on upcoming releases until days before their launch, so the lack of details on the Karma are no cause for concern.