GoPro Inc (GPRO) shed 14% in Wednesday’s trading after the company pre-announced Q1 revenue of $119 million, down 51% year-over-year, and far below its prior guidance of $140-160 million.
The action camera maker reported adjusted losses in the middle of its projected range of $0.30-$0.40 per share, with cash of $125 million and channel inventory down by 30%. However with direct to consumer up significantly in the quarter, the average selling price (ASP) increased 23% sequentially to $350.
“For a consumer electronic company with a non-essential product levered towards tourism and getting outside … the numbers were ugly” stated Oppenheimer analyst Andrew Uerkwitz.
But he is encouraged by the fact that GoPro management is doing something many others aren’t doing: accelerating its business plan.
For GoPro that involves accelerating its strategy towards a direct-to-consumer model, which ‘makes sense’ given that Core GoPro users are already mostly digital.
This will enable the company to restructure its sales and marketing team, including a workforce reduction of over 20%. Specifically, GPRO announced plans to reduce Non-GAAP OpEx by $100 million in 2020 (from $377M in 2019) and further in 2021 to $250 million.
“With a leaner model, GoPro is better positioned to remain cash flow–positive despite vastly lower revenue (updated model down 52%). And beyond COVID-19, a lean GoPro, a profitable GoPro, a strong brand in GoPro … is an Outperform stock” cheers Uerkwitz.
As a result the analyst reiterated his GPRO buy rating with a price target of $7- indicating upside potential of over 150%. However, Uerkwitz is the only bull in the picture right now- with the stock displaying a Hold analyst consensus. (See GPRO stock analysis on TipRanks).
The company also withdrew its 2020 financial guidance, while CEO Nicholas Woodman announced plans to forego his salary for the rest of the year.