Is GoPro Worth the Money?

GoPro (GPRO) posted lower-than-expected results, first time ever, for the third quarter, 2015 as a result of lack of company’s new products for holiday quarter and low demand of its newly launched flagship cameras.

Strong growth

GoPro posted 43% increase in revenue to $400.3 million for the quarter, still missed the estimate of $433.6 million from $280 million for the third quarter, 2014. The units shipped increased by 46% to $1.6 million for the quarter from $1.1 million for the third quarter, 2014.
The quarter’s growth was driven by higher demand of its HERO4 line of devices.

The cost of revenue went up to $214 million from $156 million for the third quarter, 2015. The Gross profit for the quarter scaled up to $186 million from $124 million for the third quarter, 2014. Also, the Non-GAAP gross margin was 46.8% for the quarter compared to 44.5% for the third quarter, previous year. The adjusted EBITDA increased by 56.8% to $56.7 million from $36.2 million for the same period, last year.

Moving ahead to expenses, the research and development expenses increased to $67 million from $42 million for the third quarter, 2014, the sales and marketing expenses went up to $66 million from $48 million for the same quarter, 2014, and the general and administrative expenses moved up to $25 million from $20 million for the third quarter, 2014.

Further, the Non-GAAP operating income scaled up by 71.7% to $47.5 million from $27.6 million for the same period, last year. The Non-GAAP net income moved up by 103.9% to $36.6 million from $17.9 million for the thirds quarter, 2014.

GoPro delivered Diluted Earnings per share of $0.25, an increase of 108.3% from $0.12 for the third quarter, 2014, missing the analyst estimates.

Revenue on geographical basis

The total revenue which increased by 43%, is driven by 179% increase in revenue of EMEA region to $156.6 million from $56.1 million for the third quarter, last year and increase by 178% in revenue of $52.8 million from $19 million for the third quarter, 2014. The increase was offset by 7% decrease in revenue of America region to $190 million from $204 million for the third quarter, 2014.

Smart moves

In order to sustain its position and move ahead, the company has taken various measures in the quarter. GoPro in order to position itself well for the holidays has Re-launched its HERO4 session by pricing it between HERO+ and HERO4 Silver.

Further, the company for its HERO4 Session has released important firmware updates. In addition, the company also launched HERO+ with latest features. The company also launched Odyssey, for Google’s 3D.

Moving ahead, the company has launched app on Apple Watch, named GoPro App, which will enable users to control their own GoPros from their wrists. The company also launched its own channel on YouTube.

Cash flow profile

The cash flow from Operating activities fell heavily to $4.6 million from $47 million for the third quarter, last year. The cash used in Investing Activities went up to $73.5 million from $10.2 million for the third quarter, previous year. The cash flow from Financing Activities dropped to $11.1 million from $96 million for the third quarter, 2014. Further, the cash and cash equivalents at the end of the period increased to $279.9 million from $237.7 million for the third quarter, previous year.

Valuation

GoPro has trailing P/E ratio of 15.53 and forward P/E ratio of 14.23, indicating future earnings growth. The company further has PEG ratio of 0.66, meaning that the company will have to pay less for its future growth earnings. In addition, the company has Price/Sales ratio of 1.52 and Enterprise Value/Revenue of 1.15.

Conclusion

To wrap up, GoPro posted good results for the third quarter, 2015, still, for the first time, missed the analyst estimates for both top and bottom line. The quarter posted increased revenue, operating income and net income. Also, the Diluted Earnings per share scaled up to $0.25 from $0.12 for the third quarter, 2014. The company’s forward P/E ratio indicates its future earnings growth and has PEG ratio of 0.66.

Looking forward to the fourth quarter, 2015, the company anticipated Diluted Earnings per share in the range of $0.35-$0.45 and revenue in the range of $500 million-$550 million.
Published on Dec 14, 2015
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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