GoPro Inc (GPRO) stock hasn’t had the best of rides recently. Going into its earnings report on Thursday afternoon, shares of the wearable action camera company were down 40% year-to-date. At $10.71, it was a far cry from 52-week highs at $65.
First-quarter earnings aren’t going to change that. But what we saw from the company is good news for GPRO stock.
GoPro beat revenue expectations handily, although it missed on earnings per share. Full-year guidance held firm.
Right now, revenue and guidance should be the main concern of any GPRO stock owner. Let’s take a look at GoPro’s first-quarter results and what it means for GoPro shares.
After losing 6% during regular trading on Thursday, shares started a few percentage points higher in after-hours action as traders applauded the revenue beat — but reconciled that with an earnings miss and unchanged guidance. (Note: By the time I was finished writing this article, GPRO stock was down 1%).
GPRO Stock: 2016 Is Pivotal Year
We knew first-quarter results, on their face, would be dour. The company warned the markets months ago, and expectations weren’t high to begin with.
All this is a way of saying: Brace yourself.
GPRO saw revenue plunge 49.5% in the first-quarter, cratering from $363.1 million to $183.5 million. But expectations being what they were, this actually was good news. Analysts were calling for revenue to slump 53.4% year-over-year to $169.1 million, so it was nice to see such a sizable beat here.
Margins, however, took a serious hit. GPRO stock posted a non-GAAP EPS loss of 63 cents, worse than the 60-cent per-share loss Wall Street wanted.
But like I said going into today’s report, the Q1 numbers to some extent really don’t matter. It’s all about guidance, and how management thinks the rest of 2016 will play out.
GPRO stock is at a pivotal moment: Having already lost mainstream investor confidence, Nick Woodman’s company needs to prove it can hang with the big boys and bounce back from a really tough run.
But as far as that goes, guidance remained unchanged. GPRO maintained its full-year revenue guidance range between $1.35 billion and $1.5 billion. Nothing to crow about there.
Later this year, GoPro’s quadcopter drone (unpriced), its 360-degree camera rig (the $5,000 Omni) and the Hero5 (due out in October) will drive results, or at least, they should.
As for Q1, GoPro emphasized the fact that its Hero4 Silver camera was the “best-selling digital image camera on a unit and dollar basis” in the U.S., but also noted the opening of its first retail store in China and the fact that international sales accounted for more than 50% of revenue.
To that note, it is impressive that GoPro was able to beat so handily on revenue despite the dollar’s overall strength. But, all in all all, nothing too stellar from the company, and nothing to really make big-time investors change their thesis on GPRO stock.
The market’s muted reaction — unlike its reaction to Fitbit Inc (FIT) earnings — is appropriate. Muted, but somewhat positive.
What everyone and their mother wants to know is this: Was GoPro just a fad — a one-time, lightning-in-a-bottle growth dynamo that’ll fade as quickly as it invaded our culture? Or will GoPro change and adapt — with drones, with VR tech and the like — to redeem itself and emerge as a tech stalwart that’s around for another 40, 50, 100 years?
We won’t discover all those answers in 2016, and we received very little help toward knowing that this quarter — but the next couple of quarters should bring us clarity.
While we can’t find all those answers out in 2016, the coming quarters will certainly give us a better idea. And I expect GPRO stock to follow the evidence.
As of this writing, John Divine was long FIT stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
