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GoPro to Move Most of U.S.-Bound Camera Production to Mexico

Zacks Equity Research

In the wake of escalating trade conflict between the world’s two largest economies, GoPro, Inc. GPRO has reaffirmed its decision to shift the production of most of its U.S.-bound cameras from China to Mexico. However, cameras bound for other countries will continue to be produced in China.

Management believes that it would be judicious to move manufacturing out of China to cope with potential tariffs and realize some cost savings and efficiencies. Such a diversified approach will help the company to expand its business irrespective of tariff implications. Although GoPro’s manufacturing partner provides facilities, the company owns its production equipment and therefore expects to make this move at a relatively low cost.

Reportedly, in June, GoPro will begin production of its U.S.-bound cameras in Guadalajara, Mexico, to support sales beginning in the third quarter. It expects most of U.S.-bound cameras to be produced in Mexico in the second half of 2019. With intensifying competition, GoPro is trying to drive demand for its cameras. Also, it aims to maintain its competitively priced product line up to increase market share globally.

Further, the action video camera maker intends to translate the healthy momentum in its business along with controlled cost into growth and profitability in 2019 while limiting operating expenses below $400 million.

The company is optimistic about its prospects, mainly on account of strong demand for its products in end markets. It plans to boost its Plus subscription service through enhanced benefits and user awareness. It also aims to work more closely with its retail partners, both in North America and abroad.

GoPro is also making investments in merchandising and retail advertising to drive a bigger brand presence while continuing to innovate. It intends to expand footprint in emerging markets like India and remains focused on scaling its CRM efforts to augment customer base.

Driven by diligent execution of operational objectives, the stock has recorded an average return of 15.5% against the industry’s decline of 3.9% over the past year.

Currently, GoPro has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader industry are Dolby Laboratories, Inc. DLB, Weight Watchers International, Inc. WW and MasterCraft Boat Holdings, Inc. MCFT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dolby has long-term earnings growth expectation of 13%.

Weight Watchers has long-term earnings growth expectation of 12.5%.

MasterCraft has long-term earnings growth expectation of 15%.

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