GoPro Inc. has provided a disappointing forecast for its current quarter, leading to a decline in its shares on Friday.
The action camera manufacturer expects to generate between $270 million and $290 million in revenue for the third quarter. As for adjusted earnings per share, the company predicts a breakeven to 4 cents range. It is important to note that only two analysts currently cover GoPro, according to FactSet. Their expectations as of July 31 were for revenue of $320 million and adjusted EPS of 16 cents.
During Thursday’s earnings announcement, Chief Financial Officer Brian McGee attributed the second quarter’s revenue outperformance to better-than-expected sales of the company’s entry-level products. However, McGee acknowledged that this strong performance, coupled with retailers carrying lower inventory levels, has resulted in a more conservative guidance for the third quarter.
Furthermore, GoPro highlighted “a larger-than-expected drop off in sales at GoPro.com due to the discontinuation of subscription-related camera discounts at the time of purchase.”
As a result, GoPro shares experienced a decline of approximately 5% in morning trading on Friday.
Looking ahead, McGee expressed optimism for 2024 and anticipated reaping the full-year benefits of their strategic shift. He added that by that time, they would no longer be burdened by the $30 million price protection expenses expected in 2023 due to their price change.
GoPro Faces Challenges but Shows Signs of Progress
Meanwhile, Wedbush’s Alicia Reese took a more optimistic view of the company’s shares. She noted the “encouraging” attach rates and positive momentum in first- and second-year subscription retention. Reese believes that if these trends continue, they will contribute to margin expansion and ultimately help GoPro reach the previously estimated earnings per share level. She also predicts that over time, investors will warm up to the company as GoPro accelerates its share repurchases. Reese commended GoPro for swiftly adjusting its strategy in response to challenges like inflation and low retail inventory replenishment. After the report, she maintained her outperform rating and $6 target for the stock.
It is important to note that GoPro continues to face headwinds, but there are positive developments and strategies in place to address these challenges.