GoPro (GPRO) A Solid Bet Now: Invest In The Stock?

Shares of GoPro, Inc. (NASDAQ:GPRO) have underperformed the industry in the past year. The stock has declined 16.3% in contrast to the industry’s surge of 50.5% in the same time frame. The company recently reported decent quarterly numbers but disappointed with its guidance issued for the fourth quarter. This is one reason why shares of this Zacks Rank #2 (Buy) stock have declined post release of its results.

If the company’s soft growth projections have let the market down on one hand, its satisfactory quarterly report offered some relief. The company reported earnings of 15 cents, substantially ahead of the Zacks Consensus Estimate of break-even level.

Also, GoPro surprised investors with its sales figures as its quarterly revenues soared 37.1% from the prior-year quarter’s tally. The top line also surpassed the Zacks Consensus Estimate, which marked the company’s second consecutive quarter of revenue growth.

The company’s revenue growth was driven by robust sales of the latest Hero5 cameras and launch of its premium-priced HERO6 Black with global on-shelf availability. HERO5 cameras are enjoying impressive market traction, which is likely to reflect well in the company’s upcoming quarters. The HERO5 camera is proving to be particularly popular in China and Europe. Also, the company has been recently logging strong accessory revenues that should continue to drive the metric higher in the near term.

GoPro has also significantly curbed operating expenses, limiting the possibility of making illogical decisions like selling the Karma drone at low margins and pushing inventory into the retail channel. Operating expenses in the third quarter were down a whopping 42.4% year over year, having significantly contributed to the earnings beat. In fact, the company expects operating expenses to fall below $500 million to boost profits and expand margins.

GoPro has been aiming to transform itself from the ‘camera maker’ to ‘content maker,’ and has taken significant steps to diversify into higher-margin businesses including video editing and virtual reality.

GoPro has definitely struggled of late with messed-up product launches, operational stumbles and several attempts to hit the right price points. Shares of the company have slumped over 56% in the last couple of years as the company grappled with production delays and bungled up product roll outs. As a result, it lost ground to competitors like Sony Corp. (NYSE:SNE) , Garmin Ltd. (NASDAQ:GRMN) and Nikon Corp. (OTC:NINOY) . This culminated in some significant layoffs, restructuring measures and the decision to shutter its nascent entertainment business.

However, the current year has been kinder to GoPro with the company having cut down on losses and started to inch toward profitability. We remain optimistic about the company’s encouraging new product line-up, including the HERO 6, the new Fusion camera and a software update on the Karma Drone, which should drive growth and incremental margins for the company in times ahead.

GoPro, Inc. Price and Consensus

Further, analysts have been witnessing positive estimate revisions of late, boosting a bullish sentiment around the stock. The stock has seen the Zacks Consensus Estimate for 2017 being sharply revised upward from a loss of 3 cents to earnings of 5 cents over the past couple of months.

Its robust product arsenal, positive analyst outlook, decreasing expenses and expanding margins bode well for the company. This uptrend should impact the share price as well. Investors, too, could benefit from the stock riding high on these positives.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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