Is GoPro Inc (NASDAQ:GPRO) A Good Buying Opportunity Right Now?

The coronavirus pandemic has left several companies struggling to deliver profits or even survive. One such company is GoPro Inc (NASDAQ:GPRO), which has cut down on its workforce, withdrawn its financial guidance, and restructured its business model. The stock of the company has fallen over 60% from its 52-week high, noting a fall of 35% year-to-date.

Earnings Recap

The company’s camera is left being unsold during this time of lockdown. The company had issued guidance stating the expected sales of the camera in the first quarter to be 850,000 to 900,000 units generating, and the revenue was forecasted to be $140 million to $160 million. The actual sales in Q1 came to 700,000 units while the revenue generated stood at $119 million, with the company’s EPS would be a loss in the range of $0.30.

Post the results, the company decided to shift its business to a direct-to-customer (DTC) model, letting go of 20% of its employees.  Nick Woodman, the CEO of the company, has also decided to forego his remaining salary for the year so as to bring down the operating expenses of the company.

Go-Pro is known to launch its products around the holiday season when the demand is high. When the company launches new cameras, it cuts the price of the older versions of its camera in order to sell off its stock. This brings down the profit margins of the older models. The company had reported (during its Q4 earnings call) a higher than expected inventory at the end of 2019 and stated that the high demand in Q1 would help clear the stock and would also increase the average sales price (ASP) per camera by 6% to 10% thereby generating profits. The company recently reported that the inventory was down over 30% and the ASP up by 23% quarter-to-quarter.

The company’s product roadmap remains the same with plans to launch new hardware, software, and subscription products. The company also plans to focus on the DTC model, which could bring the operating expenses to $250 million in 2021 from the previous year’s $415 million. Further updates would be provided by the company later in May. Many believe that the DTC model would significantly benefit GoPro.

About Travis Garlick 1821 Articles
Been writing about and trading stocks since 2013. Manage a group of micro-cap investors on Facebook with over 15,000 members. Turned $8,500 into 185k the first year I started trading stocks and haven't looked back.