GoPro Turnaround to Be Highly Dependent Upon Drones

May 3, 2017 by Jon C. Ogg

GoPro Inc. (NASDAQ: GPRO) has so far fallen quite far from its glory days, after having had an incredibly hot initial public offering. Initially the company just sold action cameras, but the turnaround that it has telegraphed may have a large dependence on future drone plus camera sales.

CEO Nick Woodman has talked about a turnaround despite the company having lost money for the sixth consecutive quarter. The reason for the bias, outside of kind of being obligated to, was that GoPro’s sales rose 19% to $218.6 million. This was over $10 million higher than what analysts expected.

GoPro also gave guidance showing that revenues in the second quarter would be $270 million, with a $10 million range in either direction. That was above the $240 million that was expected by analysts.

Roughly two-thirds of GoPro’s revenue came from outside the United States during the last quarter. GoPro noted that HERO5 drone camera sales were strong in China and Europe, and the $799 consumer drone named Karma is off to a strong start and ahead of expectations. Woodman said he was happy with the performance, but individual sales were not broken out.

GoPro’s first big product was its HERO action camera, but drones with cameras might have to be the next frontier for the company’s turnaround. Some investors will recall that GoPro issued a recall for about 2,500 consumer drones back in November due to sudden power outages.

GoPro’s headcount is shrinking from layoffs. It had 1,327 employees at the end of this March. That was down 14% from the end of 2016 and down about 23% from the end of September in 2016. That might no longer sound like a major growth company.

Along with earnings, GoPro used NPD data to show that GoPro’s Karma drone with HERO5 camera was the second-best-selling drone priced over $1,000 in the United States on a unit basis. GoPro also showed that it launched its Fusion 5.2K spherical camera pilot program. The release said:

To optimize the Fusion user experience, we are working closely with technology and content partners like Adobe and Fox Sports as well as content platforms like Facebook. Professional content creators can apply to participate in the pilot program for Fusion, a 5.2K spherical camera, expected to roll-out during the summer of 2017. A limited commercial release is expected by the end of the year.

As far as how drones will play a part in growing sales ahead, Thomson Reuters expects GoPro to post adjusted earnings at a loss of $0.15 in earnings per share in 2017, and it sees a gain to earnings of $0.17 per share in 2018. This would come from expected sales growth of 12% in 2017 to $1.33 billion and 4% additional growth in 2018 to $1.38 billion. For that to occur, drones with camera sales will have to play a role.

Again, much of GoPro’s turnaround may boil down to GoPro’s drone exposure. Though shares were at $8.50 on last look, this stock was above $9.00 just a week earlier. GoPro’s market cap is $1.22 billion, and its 52-week trading range is $7.14 to $17.68. The consensus analyst price target is just $8.54.

24/7 Wall St. recently forecast 17 ways that drones will dominate our lives in the near future. There is a lot of growth coming for the sector. Whether that overall growth will be a boon for GoPro remains to be seen.

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