It has been about a month since the last earnings report for GoPro (GPRO). Shares have lost about 6.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is GoPro due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
GoPro Q3 Loss Narrower Than Expected, Revenues Fall
GoPro reported mixed third-quarter 2019 results, wherein revenues declined year over year but net loss narrowed. The action video camera maker’s performance was primarily driven by the launch of HERO8 Black and MAX as well as healthy demand for HERO7 cameras with robust market share in Europe and Japan. Lower operating expenses and inventory management also acted as tailwinds for business operations.
On a GAAP basis, net loss for the September quarter was $74.8 million or loss of 51 cents per share compared with net loss of $27.1 million or loss of 19 cents per share in the year-ago quarter. The year-over-year wider net loss was primarily due to lower revenues.
However, non-GAAP net loss came in at $61.3 million or loss of 42 cents per share compared with net loss of $6.1 million or loss of 4 cents per share in the year-ago quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 48 cents.
GoPro generated revenues of $131.2 million, down 54.1% from $285.9 million a year ago, primarily due to substantial decline in sales in the Americas, Europe, Middle East and Africa (EMEA) and Asia and Pacific (APAC) region owing to production delays of HERO8 Black. The top line, however, surpassed the consensus estimate of $125 million.
Revenues from Americas came in at $60.4 million (46% of total revenues), down 49.7% from $120.1 million in the year-ago quarter. Revenues from EMEA were $49.4 million (37.7%), down 48.3% from $95.6 million and APAC generated $21.4 million (16.3%), down 69.5% from $70.2 million.
Revenues from Direct channel were $71.7 million (54.7% of total revenues), down 46.4% from $133.7 million. Revenues from Distribution channel came in at $59.5 million (45.3%), down 60.9% from $152.2 million year over year.
The company shipped 0.5 million camera units during the reported quarter, down 56.3% year over year. As of Sep 30, 2019, GoPro had $250 million in inventory compared with $116.5 million as of Dec 31, 2018. This short-term increase in inventory was due to the delay in shipping HERO8 Black Cameras due to production delays resulting from shift in production facilities from China to Mexico to nullify the impact of trade war and related tariffs. Notably, HERO7 Black and MAX represented more than 75% of third-quarter camera revenues.
Cash Flow & Liquidity
GoPro utilized $112.7 million of net cash from operating activities during the first nine months of 2019 compared with $90.8 million in the year-ago period. As of Sep 30, 2019, the company had $43 million in cash and cash equivalents with $146.2 million of long-term debt.
For the fourth quarter, revenues are expected to be in the range of $550-$585 million with non-GAAP earnings of 74-84 cents per share and GAAP earnings of 65-75 cents. Gross margin is expected in the vicinity of 40%, while operating expenses are likely to be about $105 million.
For the full year, revenues are expected to be in the range of $1.22-$1.25 billion, up 6% to 9%. Non-GAAP earnings is anticipated to be 30-40 cents per share. GAAP EPS is likely to be loss of 10 cents to breakeven with EBITDA of about $90 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -7.01% due to these changes.
At this time, GoPro has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, GoPro has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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