GoPro plunges after disappointing guidance, despite earnings beat

Key Points
  • Shares of GoPro fell in after-hours trading after the company posted weaker-than-expected guidance for the fourth quarter.
  • Earnings and revenue for the third quarter beat Wall Street expectations, however.
GoPro gives weak Q4 guidance
GoPro gives weak Q4 guidance

GoPro shares plunged after reporting disappointing fourth-quarter guidance, despite posting earnings that topped Wall Street expectations.

The fourth quarter includes the holiday shopping season.

The company said it expects fourth-quarter earnings between 37 cents and 47 cents per share on $470 million in revenue. Analysts had projected earnings per share of 57 cents on revenue of $521.2 million, according to Thomson Reuters consensus estimates.

The stock fell more than 10 percent in after-hours trade.

Here's how the company did compared with what Wall Street expected:

  • EPS: 15 cents vs. 2 cents expected according to Thomson Reuters
  • Revenue: $330 million vs. $313.8 million expected according to Thomson Reuters

In the year-ago quarter, GoPro reported an adjusted loss per share of 60 cents on revenue of $240.6 million. GoPro on Wednesday reported year-over-year revenue growth of 37 percent.

While the stock has gained more than 20 percent so far in 2017, it has fallen more than 15 percent in the past 12 months.

GoPro shares have seen a lot of volatility as the company cuts costs as part of its plan to return to profitability. The company has attempted to shift focus away from its core wearable camera products toward drones and newer markets, such as virtual reality.

But investors are still looking for signs that the progress GoPro has made is stable. In October, GoPro shares initially fell after Google announced camera improvements for its smartphones as well as an artificial intelligence clip-on camera.

Shares pared losses after analysts said the market was overreacting and overestimating the potential threat from Alphabet's product.

On a conference call Wednesday, CEO Nick Woodman spun Google's device as a business booster.

"It is encouraging to see that other companies are raising awareness that differentiated form of capture to smartphones exists," he said. "That can raise interest level among consumers."

GoPro's own product launch weakened fourth-quarter guidance.

GoPro's goal of reducing inventory before the first quarter of 2018 includes holiday promotions that will likely reduce their products' average selling price.

Executives said remaining inventory consists mostly of Hero5 Black cameras, which lost popularity after the November launch of the Hero6 Black model.

"It's not that we have a bunch if inventory and are trying to clear it all. There was a bit of softness in Hero5 sell-through, post Hero6 launch," Woodman said on the conference call. "The launch was totally dedicated to Hero6, and it stole Hero5's thunder."

But Woodman also said extra inventory hurt the company at the start of 2017. Since GoPro plans to launch a series of new products next year, executives would rather unload extra inventory in the fourth quarter than have it damage selling price in 2018.

Despite promotions that GoPro will market for existing inventory, the company hopes to generate demand for full-price products as it enters the holiday season.