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GoPro’s (GPRO) transition from a hardware unit to a direct-to-consumer subscription business seems to be going well, based on its impressive 1Q 2021 results. The company delivered a 71% year-over-year increase in revenues to $204 million. Gross margin was up 6.4% to 38.6%.
GoPro bounced back and reported a narrowed loss of $10 million vs. $64 million in the comparable quarter. Adjusted EBITDA also improved to positive $11 million from negative $41 million delivered in 1Q 2020. Net loss per share came in at $0.07, a significant improvement from $0.43 in 1Q 2020.
According to CEO and Founder, Nicholas Woodman, GoPro remains well-positioned to grow margin and profitability on continued subscription growth. As of April, GoPro subscribers had already surpassed the one million mark. (See GoPro stock analysis on TipRanks).
"GoPro fired on all cylinders during the first quarter of 2021. Strong revenue growth globally, a continued shift to higher-end cameras, and subscription growth drove record ASP's that resulted in expanded gross margins and operating results in the quarter," said CFO Brian McGee.
In April, Wedbush analyst Michael Pachter reiterated a Hold rating on GoPro, insisting that the company continues to enjoy success with its direct-to-consumer transition strategy.
“Given the rapid growth in this market, GoPro is expanding its core user base even as the pandemic has kept many of its traditional core users indoors. As people begin to travel again as the year progresses, we expect GoPro to benefit. We expect GoPro to be consistently profitable and think that it is on the right track with its DTC strategy”, stated Pachter.
The analyst has a $12 price target on the stock, implying 14.94% upside potential to current levels.
Consensus among analysts on Wall Street is a Hold based on 1 Buy, 1 Hold, and 1 Sell rating. The average analyst price target of $9 implies 13.79% downside potential to current levels.
GPRO scores a 6 out of 10 on TipRanks’ Smart Score rating system, implying its performance is likely to align with market expectations.