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GoPro Stock: A Picture-Perfect Post-Earnings Dip
Stock Analysis & Ideas

GoPro Stock: A Picture-Perfect Post-Earnings Dip

California-headquartered GoPro (GPRO) develops and sells mountable/wearable cameras. I am bullish on the stock.

Can big profits come from small cameras? That’s the billion-dollar question that any prospective GPRO stock trader will want to answer for themselves before committing any capital.

On Wall Street, however, not everyone’s enthusiastic about GoPro. Indeed, GPRO stock has fallen sharply in 2022, so far.

It’s baffling, really, since GoPro isn’t doing badly as a business venture and there’s financial data to prove this.

Furthermore, as we’ll discuss in a moment, GoPro is still innovating in the portable-camera market with the introduction of a product that’s light in weight, but could prove to be a heavyweight in the specialty-camera industry.

Pushing the Limits

Being a market disruptor means delivering products and services that the competitors haven’t developed or even considered. Time and again, GoPro has pushed the envelope in terms of what can be done with small, take-anywhere cameras.

In a recent example of this drive to innovate, GoPro introduced a new camera model that’s not only potentially game-changing, but might even mark the creation of a whole new niche camera industry. Behold, if you will, the HERO10 Black Bones, GoPro’s lightest camera ever. It’s specifically designed to be the ultimate first-person view (FPV) drone camera.

It’s conceivable that GoPro could modernize, popularize, and even revolutionize the market for lightweight, flight-enabled cameras.

If you’re going to stick a camera on a drone, of course it has to be small and light but it should maintain sharp image quality. To that end, GoPro founder and CEO Nicholas Woodman assures that the HERO10 Black Bones “delivers HERO10 Black image quality and performance in a lightweight body that is ideal for aerial cinematography.”

Amazingly, this product only weighs 54 grams, so it’s ideally suited to FPV image-capture technology. Furthermore, the HERO10 Black Bones can capture cinematic-quality 5K 4:3 video at 30 frames per second — not too shabby for a lightweight camera.

“We’re excited to see how far the community can push the limits of FPV content creation with HERO10 Black Bones,” commented Pablo Lema, GoPro VP of Product. GoPro’s investors should be excited, as well.

A Beat, but Still a Drop

While the introduction of the HERO10 Black Bones should get investors excited about GoPro, lately we’ve only seen a snapshot of a stock in decline.

As you might have guessed, this price move was related to an earnings event that some folks didn’t view favorably. Here’s the kicker, though: There’s no shortage of positive data points to take away from GoPro’s Q1 2022 results.

GoPro’s quarterly revenue rose 6% year-over-year to $217 million. Wall Street might not think that’s enough revenue growth, but at least GoPro’s top-line results are moving in the right direction.

Next, GoPro announced quarterly non-GAAP earnings per share (EPS) of $0.09. This handily beat the analysts’ consensus estimate of five cents per share. It also outpaced the year-ago quarterly result of three cents per share.

GoPro also reported quarterly adjusted EBITDA of $21 million (10% of revenue), marking a vast improvement over the prior-year quarterly result of $11 million (5% of revenue).

It’s worth noting that GoPro has demonstrated an ability to sell high-end products, as the company’s cameras with retail prices at or above $400 represented 92% of GoPro’s Q1 2022 camera revenue.

In light of these impressive results, GoPro CFO and COO Brian McGee emphasized the company’s ongoing evolution and transformation. “The first quarter of 2022 represents another quarter of GAAP profitability, coinciding with GoPro’s strategic shift to becoming a more direct-to-consumer, subscription centric business back in the second quarter of 2020,” McGee explained.

He added that GoPro has steadily grown its revenue, gross margin, and GAAP profitability and cash holdings since 2020’s second quarter. McGee’s points are duly noted, and make the negative response to GoPro’s financial results seem irrational.

That’s not necessarily a bad thing, though. Value-focused investors should consider GPRO stock in the $7s or $8s as a gift that shouldn’t be turned down.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, GPRO is a Moderate Buy, based on two Buys and one Sell. The average GoPro price target is $10.33, implying 42.7% upside potential.

Takeaway

Apparently, the investing community isn’t particularly pleased with GoPro’s financial results. The dour response seems overstated, though, and perhaps unreasonable.

Yet, irrationality can lead to opportunity in the financial markets. Besides, GoPro’s quarterly results shouldn’t be off-putting to the company’s investors.

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