GPRO Stock Gaining Popularity Again?
In the past 12-month, GoPro Inc (NASDAQ:GPRO) stock has been trading deep in the doldrums. Now, things might start to change.
Known as the maker of action cameras, GoPro stock had enjoyed solid gains since it went public two years ago. However, once people realized that not everybody needed a GoPro camera, things went south. In the past year, GPRO stock plunged a whopping 80%.
There is a silver lining in every cloud, though. Once the stock’s valuation gets low enough, any sign of growth could spark a rally. It also helps the company’s case that as GoPro stock got killed, Wall Street’s expectations have been on the cautious side, so there’s a better chance of delivering an earnings beat.
That’s exactly what happened on Wednesday, July 27 after the company reported its earnings.
In the second quarter of 2016, GoPro generated $220.8 billion in revenue. While the number represented a massive 47.4% drop from the year-ago period, it beat Wall Street’s expectations of $194.3 million. (Source: “GoPro Announces Second Quarter 2016 Results,” GoPro Inc, July 27, 2016.)
The bottom line helps to explain why the company was so deep in the doldrums. The company was generating $0.35 in earnings per share in the year-ago period. Now, it’s posting a net loss of $0.52 per share. Then again, due to lowered expectations, GoPro’s net loss per share was narrower than analysts’ estimates of a loss of $0.58 per share.
Beating both top- and bottom-line expectations sent GPRO stock higher in afterhours trading on Wednesday. On Thursday, the momentum was still going strong. By around 2:00 p.m., GoPro stock was up 13.2%.
Still, if you look a bit further back, this rise would look like nothing compared to its giant downfall. Even after Thursday’s jump, GoPro stock is down 30% year-to-date.
So, is GPRO stock on its way back up, or is this just a one-time event?
Well, judging by what the company just said about its current business, GoPro stock could get some much-needed optimism from investors.
GoPro Camera: Still the Go-to Choice for Consumers
Despite the change in sentiment since last summer, GoPro cameras are still around. Sales aren’t as great as before but the company’s position in the action camera market is still solid. According to the NPD Group’s Retail Tracking Service, GoPro accounted for six of the top 10 products on a unit basis in the digital camera category in the U.S. in the second quarter. Moreover, its “Hero 4 Silver” camera remained the best-selling camera for the seventh consecutive quarter.
If GoPro cameras are still popular, why did sales plunge so much last year? Well, in an interview with CNBC on Thursday, GoPro’s founder and chief executive officer, Nick Woodman, said that last year’s revenue suffered because the company had too many products.
“They weren’t strong enough and at the end of the year we loaded them into the retail channel,” said Woodman. “Sell-through wasn’t there and we’re just now selling through that product, so we should now see revenue starting to rise.” (Source: “GoPro Pops After Topping Revenue Estimates,” CNBC, July 27, 2016.)
Going forward, Woodman believes “GoPro is well-positioned for the second half of the year.” (Source: Ibid.)
The company expects revenue to be between $1.35 billion and $1.50 billion for full-year 2016, ahead of consensus estimates of $1.34 billion.
Most importantly, GoPro said that it could be GAAP and non-GAAP net income profitable for the fourth quarter of 2016. When the action camera maker becomes profitable again, investors will probably take a new look at GPRO stock.
The Bottom Line on GoPro Stock
At the end of the day, keep in mind that for a stock to go from $60.00 a share to $10.00 a share, it takes an 83.3% drop. However, for that stock to go from $10.00 a share back to $60.00, it would need a 500% gain. So, even though the company is now well positioned to make a comeback, it will take more than a solid earnings report for GPRO stock to make a full recovery.