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GoPro (GPRO) Down 29.3% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for GoPro (GPRO). Shares have lost about 29.3% 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 the most recent earnings report in order to get a better handle on the important drivers.

GoPro's Q3 Loss Narrower Than Expected, Revenues Beat

GoPro reported third-quarter 2018 adjusted loss of 4 cents per share, narrower than the Zacks Consensus Estimate of a loss of 7 cents.

On a GAAP basis, the company incurred a loss of 19 cents compared with earnings of 10 cents in the year-ago period.

The company posted better-than-expected revenue numbers for the quarter and also reduced its operating expenses on a year-over-year basis.

Inside the Headlines

Total revenues came in at $285.9 million, down 13.3% on a year-over-year basis. However, the figure trumped the Zacks Consensus Estimate of $272 million.

Notably, the year-over-year decline in revenues was partially offset by robust sales of the company’s HERO7 Black and Fusion products, particularly in the United States.

GoPro was the best-selling camera in the overall digital imaging category in North America for 19th consecutive quarter. The company remains optimistic about its prospects mainly on account of strong demand for its products in end markets.

For the quarter, R&D expenses were down 25.2% year over year. Sales and marketing expenses were up 20%. Third-quarter total operating expenses came in at $112.4 million, down 8.2%.

Non-GAAP gross margins contracted 690 basis points year over year to 33.2%. Non-GAAP operating loss came in at $3.6 million, compared with non-GAAP operating income of $24 million in the year ago quarter.

For 2018, the company remains well on track to limit operating expenses below $400 million. A large part of the reduction can be attributed to the company’s decision of exiting its drone business and reducing employee headcount.

Liquidity

Exiting the quarter, the company had cash and cash equivalents of about $143.2 million, down significantly from $164.6 million as of Sep 30, 2017.

For the first nine months of 2018, net cash used in operating activities was $9.8 million compared with $55.5 million in the prior-year period.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -20% due to these changes.

VGM Scores

At this time, GoPro has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

GoPro has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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