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GoPro Sees Record Camera Sales During Memorial Day Weekend

Zacks Equity Research

On May 29, GoPro, Inc. GPRO reported record e-commerce camera sales over the Memorial Day weekend. The momentum was primarily driven by its flagship product, HERO8 Black. The San Mateo, CA-based action video camera maker also debuted the $69.99 Zeus Mini mountable light, which is compatible with its entire line of cameras. The company’s shares climbed 4% in Friday’s session.

The development is an outcome of GoPro’s strategic shift to a more direct-to-consumer business to drive higher gross margin and lower the threshold to achieve profitability. Global demand on GoPro's website increased significantly since the third week of April, surpassing the prior year’s weekly demand by at least 500%. Management anticipates a sell-through of 600,000-650,000 units in the second quarter of 2020.

GoPro believes that a more direct-to-consumer-centric approach is better aligned with the present business climate as well as accretive to average selling price of products and gross margin. That said, the company will continue to sell to select leading retailers in key regions where consumers still prefer offline purchase. Also, GoPro intends to expand its footprint in emerging markets and is focused on scaling its customer relationship management efforts.

In April, the company announced restructuring measures that will help it become a more efficient direct-to-consumer-centric business. It decided to cut more than 200 jobs and shift sales operations to market digital adventure cameras directly to consumers. So the operational changes, staff reductions of more than 20% and cuts to office space are estimated to save $100 million in 2020 as well as limit expenses to $250 million in the next year.

Although GoPro’s global distribution network has been impacted by the COVID-19 pandemic, the company stated that these reductions will not impact its 2020 product roadmap, which includes new hardware, software and subscription products. In 2019, GoPro.com attracted an average of seven million visitors each month and generated more than 20% of revenues in top European markets as well as almost 20% in the United States.

GoPro intends to translate the solid momentum in its business along with controlled cost into growth and profitability, while limiting operating expenses. The company is optimistic about its prospects, mainly owing to strong demand for its products in end markets. It plans to augment the Plus subscription service through benefits and user awareness while working closely with its retail partners in North America and internationally.

Shares of GoPro have gained 23% against 1.5% decline of the industry in the past six months.

GoPro currently carries a Zacks Rank #3 (hold).

Some better-ranked stocks in the broader sector are Turtle Beach Corporation HEAR, Ooma, Inc. OOMA and Plantronics, Inc. PLT. While Turtle Beach and Ooma sport a Zacks Rank #1 (Strong Buy), Plantronics carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Turtle Beach has a trailing four-quarter positive earnings surprise of 46.4%, on average.

Ooma has a trailing four-quarter positive earnings surprise of 228.2%, on average.

Plantronics has a trailing four-quarter positive earnings surprise of 103.5%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

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