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TheStreet Open House

GoPro Plunges: What Wall Street's Saying

NEW YORK (TheStreet) –– GoPro (GPRO) shares tanked after its first quarterly earnings since going public, as investors fear mounting losses.

Shares were down 11.8% to $42.31 despite the wearable camera company reporting adjusted earnings of $11.8 million, or 8 cents per share on $244.8 million in revenue. That was up from a loss of $3.2 million, or 3 cents per share, a year earlier.

Analysts polled by Thomson Reuters expected GoPro would earn 6 cents per share on a non-GAAP basis, on revenues of $238 million.

However, the results failed to allay investors’ fears. For example, the company reported a net loss this quarter of $19.8 million, or 24 cents per share, well above the loss of $5.1 million, or 6 cents per share, a year ago. Some investors have commented that with smartphone cameras getting better and better, GoPro’s ability to sell cameras costing hundreds of dollars may decline.

Read More: GoPro Jumps as Analyst Coverage Supports Vision of Next Big Thing

The company tried to address these concerns, noting that its popular YouTube videos are "fueling our virtuous cycle whereby viewership of GoPro content drives sales."

CEO Nicholas Woodburn also tried to demonstrate the company's international reach. "We are a global brand with room for expansion opportunities," he said on the earnings call. "38% of revenue came outside of America and there are growth opportunities in Europe, Japan, China and Korea."

Nonetheless, since its blockbuster IPO, in which shares rose 31% in the first day of trading, GoPro shares have run out of steam for now.

Read More: GoPro Stock Is Still Attractive -- if You're a Short, That Is

Here’s what a few analysts on Wall Street had to say:

Raymond James analyst Tavis McCourt (Market Perform)

“GoPro reported revenues and EPS above our expectations in its first quarter reported since its IPO. Earnings quality was exceptionally high with DSOs near historical lows and inventory levels dropping sequentially. Gross margins continued to trend up sequentially and y/y, and guidance for 35% revenue growth at the mid-point for 3Q14 was slightly ahead of our previous expectations. Despite the strong quarter and outlook, we believe our Market Perform rating is appropriate as GPRO shares are trading at ~49x our 2015E non-GAAP EPS estimate compared to high-growth consumer names closer to 30x.”

Citi analyst Jeremy David (Neutral, $42 PT)

“We believe in the powerful GoPro positive feedback loop: HERO action cam sales lead to great content which leads to more HERO action cam sales. In our survey, we found that the action cam purchase intention rate of respondents who had seen GoPro videos is 14%, almost 3x the purchase intention rate of respondents who had not seen GoPro videos. In addition, we found that nearly two thirds of U.S. consumers have never seen GoPro content, leaving room for growth. However, we ultimately expect limited adoption of action cameras by mainstream consumers and we forecast the growth rate of GoPro shipments and revenue to continue to decelerate.”

Stifel analyst Jim Duffy (Hold)

“We view clean 2Q results and a well-run conference call as testament to business controls and strength of the management team. Strong performance in the Americas driven by growth in big box and the increased penetration of the Hero3+ Black in the mix is particularly encouraging and we believe reflective of broader acceptance beyond the core action sports enthusiast user base and relative price insensitivity… Given 2Q upside, a more optimistic outlook on 3Q sales, a more favorable tax rate and share count, and expectations for slightly higher SG&A, we are raising estimates.”

Dougherty analyst Charlie Anderson (Neutral)

"We believe GoPro has established itself as one of the most valuable brands in consumer technology and has significant headroom to grow as it expands overseas. That said the post-IPO move in the stock has priced in outstanding performance as GPRO trades at 47x our new FY15 EPS estimate of $1.02. That multiple is higher than the highest multiple Apple (AAPL) has traded at in the entire iPod/iPhone/iPad era. In terms of an entry point, we would prefer a multiple in the high 20s or low 30s. Our sense is that the path to getting there is more likely to be higher estimates than the stock trading down to those multiples. So we will revisit our stance if we gain confidence in higher estimates...We don't believe there is a problem with Europeans liking the GoPro camera less than consumers in other markets. Rather, this appears to be a function of GoPro relying on third-party distribution vs. the heavily direct model in the Americas. We believe there is considerable room for improvement here in retailer distribution. Sales to EMEA are roughly half those in the Americas for GoPro."

Read More: GoPro Surges on Prospects Everyone Will Soon Own an Wearable Camera

--Written by Laura Berman in New York

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