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GoPro Stock Tanks After Q4 2017 Earnings Results Preannounced

GoPro Inc (NASDAQ:GPRO) stock plummeted by more than 20% after trading resumed following the company’s negative earnings preannouncement. The preliminary GoPro Q4 2017 earnings results were accompanied with a confirmation that the job cuts we heard about late last week are definitely taking place.

gopro q4 2017 earnings
Image Source: GoPro.com

Preliminary GoPro Q4 2017 earnings results disappoint

The GoPro Q4 2017 earnings results released this morning didn’t cover every metric the firm usually reports, but the items that were reported were enough to send GoPro stock into a tailspin.

The action camera maker estimated its fourth-quarter sales at about $340 million. That includes an approximately $80 million negative impact in connection with “price protection” on the HERO6 Black, HERO5 Black, and HERO5 Session cameras and the Karma drone. The company also expects its GAAP gross margin to come in between 24% and 26% and its non-GAAP gross margin to be between 25% and 27%. Excluding the negative 80 million impact, the company said its non-GAAP gross margin would be between 44% and 46%.

The camera maker ended the fourth quarter with about $247 million in cash and cash equivalents, which is a gain of $50 million quarter over quarter.

GoPro confirms job cuts

With the preliminary GoPro Q4 2017 earnings results came the official word that the company is slashing its workforce by cutting more than 250 jobs. After those cuts, GoPro’s global workforce will be at fewer than 1,000 employees. GoPro founder and Chief Executive Nicholas Woodman is also slashing his cash compensation for this year to $1.

The action camera maker also announced that it is exiting the drone business, even though the Karma managed to take the second-place spot in its “price band” last year. Citing concerns about competition, GoPro said the Karma is up against “margin challenges in an extremely competitive aerial market.” The company also said that the Karma faces “a hostile regulatory environment in Europe and the United States,” which it expects will slash the total addressable market for drones in the coming year. Because of these two issues, GoPro will sell the rest of its Karma inventory and then exit the drone market.

GoPro estimates that it will take a charge of $23 million to $33 million in connection with this latest round of restructuring.

Updates on camera sales

GoPro management had warned at the time of the November earnings call that demand for the HERO5 Black camera was soft at the beginning of the holiday quarter. In the preliminary GoPro Q4 2017 earnings results released this morning, they added that consumers were “reluctant” to buy the HERO5 Black at the same price as last year, “despite significant marketing support.”

They also reported a “sharp increase in sell-through” after they slashed the price on Dec. 10, adding that sell-through for the camera more than doubled in the two weeks after the price cut. Meanwhile, sell-through for the HERO5 Session camera “roughly tripled.”

The company also said that initial sales of the new Fusion spherical camera were better than expected.

Trading on GoPro stock was halted immediately after the release of the preliminary earnings results. Following the GoPro Q4 2017 earnings release, the shares plunged by more than 25% to a new record low of $5.04.

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