Goldman Expects A Weak Quarter From GoPro

GoPro Inc GPRO is likely to report a weak quarter, as expected, and there is downside to the 3Q guidance, Goldman Sachs’ Simona Jankowski said in a report. He maintained a Neutral rating on GoPro, with a price target of $11, saying that the company’s performance has been impacted by an aging product portfolio and channel inventory reduction.

Weak Quarter

Analyst Simona Jankowski expects the company to report revenues of $193mn, slightly short of the Street expectation of $195mn. Online checks indicate that although GoPro’s cameras continued to be the best-sellers on Amazon and Best Buy, the discounting was increasing.

Jankowski forecasted shipments of 741k with an ASP of $260, versus the Street’s expectation of 739k units with an ASP of $264. Gross margins are likely to come in at 38 percent, marking an improvement from 33 percent in the prior quarter. The expansion is likely to have been driven by lower fixed costs on per unit basis and no negative impact from excess purchase commitments and inventory write-downs.

Prospects Ahead

While GoPro indicated that it was witnessing improved traction in Japan, low-cost players are exerting increased pressure in China, which is a key growth market. “GoPro could also face pressure from FX and demand headwinds in EMEA, which generates about one-third of revenues for the company (33% of sales in 2015 and 1Q16),” the analyst wrote.

The revenue estimates for 3Q and 4Q were reduced by 1 percent, following the UK referendum vote. The non-GAAP EPS estimate for 2016 has been lowered from ($0.82) to ($0.85).

Did you like this article? Could it have been improved? Please email feedback@benzinga.com with the story link to let us know!