On Thursday, action camera maker GoPro Inc (NASDAQ:GPRO) is due to release its third-quarter earnings after a very eventful month. Analysts are expecting GPRO stock to report a loss of 36 cents on revenue of $315.99 million, but those figures are unlikely to be the main takeaway from Thursday’s results.
Instead, investors will be more focused on how the firm’s latest product offerings have fared since being released earlier this quarter.
GPRO Stock Is a Sinking Ship
GPRO stock has lost 65% since its debut on the market in 2014 and despite management’s best efforts, investors have continued to shy away from the camera maker over the past year.
Many believe that GPRO’s glory days are over and that the company’s action cameras have too many competitors and not enough customers while others are skeptical about whether or not the firm can expand its offerings to include software and services as well.
Earlier this quarter, GPRO released its newest Hero 5 cameras as well as the hotly anticipated Karma drones. Although those items won’t have any impact on the results being announced, they are likely to be investors’ main focus.
Karma and Hero 5 are integral to GPRO’s success, as the company has made big promises when it comes to full-year guidance, and in order to deliver, the two products will need to be well received.
GPRO CEO Nick Woodman has been talking up the importance of the products to the company’s future, so investors will be expecting to hear an update on Thursday’s earnings call.
GoPro Is Not Just a Camera Company
While the numbers are certainly important to investors, momentum is another big reason that GPRO needs Karma to do well. After all, one of the major reasons that traders abandoned GPRO stock is that the firm had very few growth prospects. Loyal GoPro customers were unwilling to trade up their older models, and competitors offering similar cameras for a much lower price were taking away from the company’s marketshare.
That’s what led Woodman to comment that GoPro is “not a camera company,” but an “experience-sharing company.”
Now that the company has a product on the market that isn’t a camera, it’s time for Woodman to prove that sentiment. On one hand, GPRO has the benefit of a quickly growing drone market now that the FAA has relaxed some of the rules regarding drone flights.
However, on the other hand GRPO is competing with several other companies for a share of that market, and the Karma drone and Hero 5 camera run about $1,000.
Other Focus Areas
GoPro’s aspirations to create reoccurring revenue streams through software subscription services will also be of interest as the company recently rolled out GoPro Plus — a monthly subscription that allows users to automatically upload and store their photos for $4.99 per month.
The company has also created a video editing app called Quik, which will allow users to edit their footage.
Another of the biggest questions on investors’ minds is whether or not GPRO can manage its inventory correctly. If demand for the new drones and cameras is as strong as Woodman has suggested, it will be important for GoPro to ensure it has enough devices to ship.
However if demand isn’t as hefty as the company was hoping, the firm could see a repeat of its $57 million inventory write down in 2015.
The Bottom Line
GoPro is in the midst of a precarious balancing act at the moment. The company’s lack of sales and shaky financials mean that there is very little room for error at this juncture.
If the Karma and Hero 5 products are successful, it would be huge news for GPRO and will likely give the stock a massive boost, as it suggests that the firm will be able to overcome its image as “just a camera maker.”
While official numbers won’t be available this quarter, investors will certainly be expecting to get a picture of how things are going and whether or not the new products will be enough to help the firm meet its full-year guidance.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
