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GoPro to shed light on gloomy holiday quarter

MARKETWATCH 7:23 AM ET 2/3/2016
Symbol Last Price Change
GPRO 10.24 0 (0%)

QUOTES AS OF 04:00:00 PM ET 02/02/2016

GoPro (GPRO) will report fourth-quarter earnings late Wednesday

GoPro Inc. (GPRO) is expected to deliver sharp declines in earnings and sales when it reports fourth-quarter earnings after the market closes on Wednesday.

Wall Street has drastically reduced its estimates on the action-camera maker over the past few weeks following last month's warning by the company that holiday-quarter sales would be worse than expected (http://www.marketwatch.com/ story/gopro-to-cut-jobs-after-weak-q4-sales-stock-dives-2016-01-13). GoPro(GPRO) also announced plans to lay off 7% of its workforce.

Here's what to expect:

(https://w.graphiq.com/w/boT9AkN0oMl)

Earnings: Sell-side analysts expect GoPro(GPRO) to report earnings per share of 5 cents, versus 99 cents in the year-earlier period, according to FactSet. The average EPS estimate on FactSet had been as high as 32 cents a share earlier this month, before GoPro's(GPRO) profit warning.

Buy-side analysts are much more bullish, however. Estimize, a software platform that uses crowdsourcing to track earnings estimates from hedge-fund executives, brokerages and buy-side analysts, has GoPro(GPRO) earning 1 cent. While GoPro(GPRO) fell short of both the FactSet and Estimize consensus numbers last quarter, it surpassed them in every other quarter since its mid-2014 IPO.

On a conference call in October, GoPro(GPRO) forecast EPS between 35 and 45 cents a share.

Also See: After Hero4 Bust, GoPro's(GPRO) hopes rest on drones and virtual reality (http://www.marketwatch.com/story/after- hero4-bust-gopros-hopes-rest-on-drones-and-virtual-reality-2016-01-13)

Revenue: In January, the company reported preliminary sales results of $435 million. That prompted FactSet-surveyed analysts to lower their consensus estimates to $435 million from as high as $507 million before the profit warning.

Those sales would mark a slowdown from $634 million in the year-earlier period. Contributors on Estimize are forecasting revenue of $434.9 million. Just like its earnings, GoPro(GPRO) missed both the FactSet and Estimize consensus estimates in the last quarter but beat them in every quarter prior.

(https://w.graphiq.com/w/hA8V9EtqxAF)

Stock reaction: Shares of GoPro(GPRO) have fallen 60% over the last three months, vastly underperforming the S&P 500's 9.5% decline. Its shares are down more than 80% over the last 12 months, versus the index's 6% decline. They tumbled another 7.5% on Tuesday.

Despite its weak sales, earnings and stock-price growth, analysts remain bullish (http://www.marketwatch.com/story/ gopros-stock-plunge-doesnt-scare-away-bullish-analysts-2016-01-14) on the company, rating the stock the equivalent to buy, according to a survey of 17 analysts by FactSet. The average price target on the stock is $16.22, which implies 58% upside from Tuesday's closing price.

Also See: GoPro's(GPRO) dismal stock performance makes it a 'bargain' for suitors (http://www.marketwatch.com/story/gopros- dismal-stock-performance-makes-it-a-bargain-for-suitors-2016-01-14)

What to watch for: GoPro(GPRO) has been warning that holiday sales were impacted by a lack of new product offerings in the fourth quarter. Analysts are also blaming weak demand for GoPro's(GPRO) cubed-shaped Hero4 Session, which was unveiled in July and has faced two rounds of price cuts.

However, Wedbush analyst Michael Pachter, who has an outperform rating and $18 target on the stock, said he thinks the consensus may be "overly pessimistic." The Street's 2016 expectations could also prove too low, he said, if GoPro(GPRO) launches its Karma drone early this fiscal year.

Also See: GoPro(GPRO) teams up with Twitter's Periscope to broadcast videos (http://www.marketwatch.com/story/gopro-teams- up-with-periscope-to-broadcast-vidoes-2016-01-26)

Several analyst estimates have yet to take into account the company's efforts in virtual reality and drones. With the key holiday quarter over and its shares battered, analysts will be questioning its turnaround plans, with a particular focus on recently-announced layoffs and new products.

-Jennifer Booton; 415-439-6400; [e-mail]


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02-03-160723ET
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