GoPro Reaffirms Q1 2017 Outlook, Sees Profitability For 2017

GoPro, Inc. GPRO recently affirmed its first-quarter 2017 revenues at the upper end of the $190–$210 million range. This is quite a welcome move after the dreary fourth-quarter 2016 results and drab guidance released last month, both of which miffed investors. Also, the company reiterated its target of full-year non-GAAP profitability and announced that it expects positive EBITDA for full-year 2017.

GoPro’s optimism stems from its company-wide restructuring efforts, which include a combination of programs to cut costs. These comprise reduction of total workforce by 15%, shutting down its entertainment division and reduction of office space. GoPro estimates elimination of 270 posts going forward. Through these efforts, the company plans to reduce operating expenses by about $650 million.

The action-camera manufacturer believes that its elaborate restructuring efforts will help it bring down full-year GAAP operating expenses below $585 million and non-GAAP operating expenses below $495 million. Also, GoPro affirmed that these cost-cutting efforts will not interfere with its pipeline of hardware and software product launches. Currently, the company believes it will likely incur charges of up to $10 million in first-quarter 2017, mainly related to severance costs for executing its plans.

GoPro has slumped hard in recent times, faring far worse than the Zacks categorized Audio/Video Home Product industry. The stock plunged 52.0% in the past six months, much wider than the industry’s loss of 10.3%. GoPro’s shares have suffered as the company faced multiple operational glitches, including product recalls, messed-up launches, production delays and missed deadlines.

The company has a choppy earnings surprise history, beating estimates twice for as many misses over the trailing four quarters. GoPro managed to get back in the green during fourth-quarter 2016 after reporting four back-to-back quarterly losses. However, on a GAAP basis, the company reported a loss of 82 cents, much wider than the 25 cents loss generated in the comparable quarter last year.

It will be interesting to see whether the beleaguered action-camera maker can reap enough benefits from its restructuring efforts to brave formidable headwinds. This Zacks Rank #3 (Hold) company’s streamlined portfolio, and strategic investments in talent, technology, software and innovative products should help it to bounce back after a dismal 2016. 

It should be noted that brokers are on the sidelines for the stock as its earnings estimates have remained unchanged over the month. The Zacks Consensus Estimate for full-year 2017 is pegged at a loss of $1.09 over the same time frame.

Stocks to Consider

Better-ranked stocks in the space include Central Garden & Pet Company CENT, Dolby Laboratories, Inc. DLB and Activision Blizzard, Inc. ATVI. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Central Garden & Pet Company has a whopping average earnings surprise estimate of 120.5%, beating estimates each time over the trailing four quarters.

Dolby has a striking earnings surprise history, with an average surprise of 30.9% for the trailing four quarters, beating estimates each time.

Activision Blizzard has beaten estimates thrice over the trailing four quarters for an average surprise of 33.9%.

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