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GoPro Inc (GPRO) Earnings Preview: More Fallout From Preannouncement

gopro earnings
Image Source: GoPro.com

GoPro Inc (NASDAQ:GPRO) already preannounced enough of its earnings numbers for investors and analysts to know that Q4 2017 was yet another weak holiday quarter. GoPro stock has been slipping further and further since that negative preannouncement. Still, the formal GoPro earnings release is set for this evening, and analysts are likely planning to drill company management about why the action camera maker continues to disappoint.

Here’s what GoPro already announced, and what was missing

Management announced on Jan. 8 that Q4 2017 sales came up far short of their expectations at about $340 million, compared to their previous guidance of $460 million to $480 million. They did not reveal Q4 earnings numbers, however.

Consensus estimates an adjusted loss of 11 cents per share now, according to MarketWatch, although before the negative preannouncement, the Street had pegged GoPro earnings at 35 cents to 48 cents per share on a non-GAAP basis. Before the GoPro earnings preannouncement, the Street had been expecting sales to be within management’s previously-provided guidance range, but since then, analysts have generally upgraded their sales estimate to the more recently-provided $340 million.

GoPro also said that its non-GAAP gross margin for Q4 2017 was between 25% and 27%, while its non-GAAP operating expenses were at $118 million to $122 million.

What to expect on the GoPro earnings call

Wedbush analyst Alicia Reese is actually expecting an adjusted profit for Q4 2017, as she estimates GoPro earnings at 19 cents per share. She said in her earnings preview for GoPro that she’s not willing to recommend GoPro stock due to “generally poor execution in recent years.” She also cited questions regarding long-term demand for the company’s cameras and its “unceremonious exit” from the drone market.

GoPro announced earlier this month that it was planning to sell the rest of its Karma inventory and then exit the drone market after that, and it is expected to complete yet another round of job cuts in connection with that exit. Reese had been expecting about $200 million in revenue from the Karma drone in 2018 before GoPro announced that it was exiting the market due to a “hostile” regulatory environment in both the U.S. and Europe.

GoPro’s camera line-up struggled in Q4 2017

Reese noted that GoPro’s preannouncement included about an $80 million negative impact from price protection on the Karma and its camera line-up, including the HERO6 Black, HERO5 Black, HERO5 Session. She said the massive shortfall against management’s sales guidance suggests “sagging demand for the GoPro experience.”

Although the HERO6 Black did about as well as was initially expected, the HERO5 Black struggled to attract sales at its original price even though GoPro supported it with “substantial marketing.” Reese pointed out that price cuts did attract sales for the HERO5 Black and HERO5 Session late in Q4, but at that point, the quarter seemed to already be a disappointment.

As the GoPro earnings release approached, the company’s stock fell by more than 1% to as low as $5.36 in intraday trading today.