Very Few Catalysts Ahead For GoPro Inc (GPRO)

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GoPro Inc (NASDAQ:GPRO)’s trouble will not likely to be resolved any time in the near-term. The company’s woes have only widened after it reported its first quarter results on May 5 though for different reasons. Though the company reported a wider loss than the Street estimated, the stock started to gain in the extended hours of trading on May 5. It was because the top line came in more than estimated by $14 million, which was a better sign considering that it was struggling to record solid sales due to cheaper products flooding the market. However, the gains were totally pulled back when the conference call was going on. The loss was extended on Friday too. As the stock has already hit the rock bottom trading sharply below the IPO price, there is very little on the downside. Similarly, there is also nothing big to suggest for upside rewards.

Average Performance Seen 

Following the results announced by GoPro Inc (NASDAQ:GPRO) last week, scramble to look at the likely scenario for the next quarter has started. A few analysts’ from the investments were not very much encouraged by the outlook for such camera maker stocks. One of the reasons for it was the sharp drop in YOY revenue in the first quarter by the wearable camera maker though it topped the estimations. The other key factor is that it was losing its pricing power thus dragging down its gross margin the process. The company was forced to lower its price after the rivals started eating away its market share.

GoPro Inc (NASDAQ:GPRO) indicated that its channel sell-thru topped by about 50% in the first quarter. Its revenue witnessed YOY loss of 49% and sequentially, the drop was 58%, which would remain a concern. However, the enhancement in the selling price by 16% sequentially, which excluded the price protection related charges in both the comparable periods. But, it was down YOY modestly. The company claimed that its estimated unit sell-through was less than 10% of what it was in the year-ago quarter. The key point was that the previous quarter benefited from HERO4 launch. The company claimed that its HERO4 Silver remained the best-selling digital camera in North America. Its net inventory witnessed 25.8% drop on YOY and lowest after third the third quarter of the year 2014. In a nutshell, the results could be taken neither as a disappointment or an upbeat one. It has both plus and minus. It was because of that reason, there was a favorable reaction to the results from the market immediately though it did not sustain.

Moving Into Mobile Space

During the conference call, GoPro Inc (NASDAQ:GPRO) expressed few comments, and that did not go well with the investors. Though this is not a reason for dragging the stock, the company indicated that it would be moving into the mobile space with the acquisition of video-editing apps like Splice and Replay, which has been rechristened as Quik now. The company made it clear that the two apps, which were purchased in February, would be merged into one platform. The company’s CEO, Nicholas Woodman, was confident of its usage among the freshers using the smartphone. He pointed out that historically, he could see it as a content-enabling platform. However, with the expansion of its view to look at the device as a platform, he was confident that everyone would look it as a platform to allow anyone with a smartphone to help create splendid content.

According to Oppenheimer analyst, Andrew Uerkwitz, the acquisition of Splice and Replay by GoPro Inc (NASDAQ:GPRO) and the integration of them represented that the company was developing. The analyst believes that as far as the company is concerned, the current year could be a transition year by focusing on creating a software ecosystem that supported its product sales. The analysts also said that the wearable camera maker’s management was juggling with a number initiative to come out of the current situation. That included a focus on mobile devices, and the unveiling of its Karma drone project.

Delay In The Launch Of Drone

While there are some positive factors to feel comfort with like enhanced Q-o-Q margin of GoPro Inc (NASDAQ:GPRO) though dipped from its own guidance, the biggest factor to affect the sentiments was undoubtedly the postponement of the launch of the Karma Drone. The company has originally scheduled to unveil it in the first half of the current year. However, during the conference call, it threw a bomb that it would be possible only during the holiday season. The company indicated that it wanted to give itself sufficient time to fine tune some of the revolutionary features that would be added into its Karma Drone.

The news of GoPro Inc (NASDAQ:GPRO) delaying its drone had its impact on the market. That was because some of the analysts, as well as, investors look at the Karma Drone as a possible blockbuster product. Already, it has a big promise of being the first highly popular, mass-market drone camera. That would be like its own set of camcorders and the benchmark set for an action-video recording. The wearable camera maker planned to sell the device $500 – $1,000. The delay has obvious made Barclay’s analyst, Joseph Wolf, to comment that he found it tough to find a favorable catalyst to get excited in the near-term at the current levels.

Conclusion

There might have been some positives from the March quarter results for GoPro Inc (NASDAQ:GPRO). However, those are not sufficient to place a bet that the stock would grow tremendously. The delay in the launch of Karma Drone would delay in turning around the company. On a valuation basis, the stock might be lower than the sales to price ratio. The stock might some good activities just before the launch.

Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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