In an attempt to boost HERO camera sales and counter the factors marring its credibility, wearable camera maker, GoPro Inc. GPRO, came up with its latest camera accessory, Karma Grip.
The stock continued its disastrous run on the bourse, year to date, having recorded an average return of -46.1%, in stark contrast to the Zacks categorized Audio/Video Home Product industry’s 12.3%. After the recent Karma drone glitch, which compelled the company to announce a recall, we can safely conclude that GoPro is mainly focused on its camera line of offerings.
New Camera Accessories
Priced at $299.99, Karma Grip is a handheld and wearable stabilization grip for HERO5 and HERO4 cameras that will help in recording high-quality videos. The latest holder can support GoPro HERO5 Black and HERO4 Black and Silver cameras.
Also, the company has plans to launch it for HERO5 Session cameras during second-quarter 2017. Users can also mount KarmaGrip on GoPro’s Chest harness and Seeker backpack. Other notable features include on-the-fly angle adjustment, lock-and-release feature and HiLight tag key. In addition, the company came up with an advanced water-proof remote Remo for HERO5 cameras that can run on voice command even in windy and noisy environments.
With the holiday season round the corner, HERO5 camera sales have gained momentum, soaring 35% during the Black Friday week, on a year-over-year basis. Also, Thanksgiving through Cyber Monday, the company witnessed an impressive 33% surge in its online sales. GoPro has been largely banking on its products, namely HERO5 cameras and Karma drones, to fuel sales in the fourth quarter after a lackluster quarter. However, with the technical glitch leading to Karma drone recalls, the company’s fourth-quarter sales are riding high on the HERO5 success.
Bad Times Follow
GoPro has been on wobbly grounds over the past two years – rallying shortly after the IPO, steadily declining in the second half of 2014, turning around in the first half of 2015 and then going down from the second half. The second half of 2016 has been particularly brutal for the company, with multiple operational hurdles, including untimely launches, production delays and missed deadlines.
The company’s camera lines have often received heavy flak from critics and consumers, with high prices being a constant negative. For instance, the HERO4 Session cameras had to be launched again, with slashed prices, to lure customers. Moreover, the company’s attempts to launch low- to mid-range devices backfired after its reasonably-priced cameras eclipsed the costlier versions.
In a bid to arrest declining margins, the company is currently focusing only on costlier versions, like Hero 4 Silver, Black, and Session. With commoditization plaguing technology stocks as well as intensifying competition in the market, it is difficult to predict a turnaround for GoPro anytime soon.
GoPro has a dismal track record, having missed estimates thrice in the trailing four quarters, with an average negative surprise of 26.9%. Of late, analysts have also become increasingly bearish on the stock, with the company’s estimates moving south over the past couple of months. The Zacks Consensus Estimate for fiscal 2016 earnings has widened from a loss of $1.62 to a loss of $1.97 per share in the past two months, attributable to four downward revisions compared with none upward.
Recent Streamlining to Help
To stage a comeback, GoPro recently introduced a few streamlining actions that are expected to bring down operating costs. In a stern step that shocked investors, GoPro decided to downsize its workforce by about 15%. This will include elimination of more than 200 full-time positions and cancelation of multiple open positions. Further, the company decided to wrap up its entertainment division and bring down its facilities to channelize resources to more profitable areas.
Escalating restructuring charges associated with these changes are most likely to impact the company’s fourth-quarter results. Nevertheless, with such concerted efforts, GoPro expects to swing back to profitability in fiscal 2017 and also slash full-year 2017 non-GAAP operating expenses to approximately $650 million. It will be interesting to see whether fiscal 2017 will turn things around for GoPro or will it join the ranks of high-profile technology stock fads.
Stocks to Consider
GoPro currently carries Zacks Rank #3 (Hold). Some better-ranked stocks in the broader sector include Capella Education Co. CPLA, Perry Ellis International, Inc. PERY and Ralph Lauren Corporation RL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in Minneapolis, MN, Capella Education, through its wholly owned subsidiaries, provides online post-secondary education services in the U.S, focused primarily on working adults. The company has an excellent earnings surprise history, beating estimates all through in the trailing four quarters. It boasts an average positive surprise of 10.9%.
Perry Ellis International operates as a mountain resort and adventure company which delivers vacation and travel experiences to its customers. The company has registered three strong earnings beats over the trailing four quarters.
Ralph Lauren designs, markets, and distributes lifestyle products worldwide. They offer two primary collections, namely luxury collection and accessible luxury collection. The company has strongly surpassed estimates each time in the trailing four quarters, with an average beat of 11.1%.
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