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Bear of the Day: GoPro (GPRO)


Founded in 2002, GoPro Inc. (GPRO) is a wearable camera maker that is known for its HERO line of action cameras and related accessories; it also unveiled its new Fusion camera, a 360 camera aimed at “prosumers.” The company had also developed the Karma drone, though news recently broke that the division is now permanently shuttered.

The company has sold over 26 million GoPro cameras in more than 100 countries, and is headquartered in San Mateo, California.

Sitting at Zacks Rank #5 (Strong Sell), GoPro was hit hard by dismal fourth-quarter results, but could a restructuring help the stock rebound?

Weak Q4 Performance

A couple of weeks ago, GoPro reported weaker-than-expected fourth quarter results.

Adjusted net loss of 30 cents missed the Zacks Consensus of a loss of 10 cents per share, and is in stark contrast to earnings of 29 cents posted in the year-ago quarter. Investors should note that GoPro has lost money in seven of the last 10 quarters.

Revenues fell over 38% year-over-year to $334.8 million, missing both our consensus estimate of $384 million and its preliminary estimate of $340 million. The top line took a big hit because of discounting to its Karma drones and Hero cameras.

Breaking it down by region, the company saw a 35.9% decline in the Americas to $175.7 million, while Europe plummeted 46.7% to $89.6 million. Sales in the Asia-Pacific region contracted 29.5% to $69.5 million.

However, there was a bright spot: GoPro noted that it holds over 80% of the action-camera market in the U.S., by unit volume. The camera manufacturer also saw its unit sales rise 28% and 96% year-over-year in China and Japan, respectively.

Earnings Estimates Lowered

As a result, GoPro’s earnings growth trajectory has taken a hit lately, with analysts becoming more bullish on the media company.

For the current quarter, two analysts have cut their outlook in the last 30 days, and the consensus has fallen from $-0.27 to $-0.36.

Seven analysts have revised their estimates downward for the current fiscal year, though earnings are expected to grow over 46% in that time frame.

Looking at the next fiscal year, earnings could grow over 90%, analysts have been slashing their outlook for this time period as well. And, the current consensus has dipped from $0.35 to $-0.04 in the last 30 days.

Will Shares Be Able to Rebound?

Shares of GPRO are down over 30% so far this year, and have plummeted more than 54% in the past one year.

GoPro, Inc. Price and Consensus

GoPro, Inc. Price and Consensus | GoPro, Inc. Quote

The company currently has no P/E since it is making no profit at the moment.

Even though GoPro holds a considerable chunk of the U.S. action camera market, its current slate of problems feels a bit overwhelming at the moment.

Poor sales from its last-generation Hero5 action camera led to the shutdown of its Karma drone division, and a price change across all of its other camera. Its stock—and let’s face it: it’s reputation—have taken hits as a result.

Looking on the bright side, you could view this restructuring as a way for GoPro to refocus itself, and figure out what its customers really want. Plus, its new Fusion camera presents the company with an opportunity to invest in machine learning technologies, which will be key to the camera’s success.

If CEO Nick Woodman and the rest of the company’s management team can get a new strategy in place, GoPro has the chance to get back on track.

For investors looking for an audio and video stock with more near-term potential, they should consider Sony Corp. (SNE), a Zacks Rank #1 (Strong Buy) stock that anticipates earnings growth of about 547% for its current fiscal year.

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