GoPro’s [GPRO] share price is up 36.36% so far this year, gaining 200% since its 52-week low of $2.00 on 16 March (as of 3 November’s close). GoPro’s share price zoom has been propelled by substantial increases in both its website sales and subscriber businesses, with both metrics improving in its latest results update back in August.
Investors and analysts will be looking for further gains in the third quarter, along with some positive guidance for Q4 and into 2021. A strong combination of the two could provide a further boost to GoPro’s share price.
When is GoPro reporting Q3 earnings?
What happened last quarter?
GoPro’s share price benefitted from strong Q2 results which saw revenue come in at $134m, up 12% on the previous quarter, with 44% of revenue coming from its website. This made last quarter GoPro’s highest ever for its online segment. Camera sales in the quarter were close to 750,000, 20% above the previous forecast of 600,000. In its Q2 release, founder, CEO and chairman Nicholas Woodman enthused “demand consistently improved throughout the quarter, with direct sales growth complemented by a faster-than-expected rebound in sales.”
Encouragingly, the company’s subscriber base, GoPro Plus, continued to grow. At the end of Q2, GoPro Plus had 372,000 paying subscribers, up 5% on Q1 and 57% ahead year-on-year. The firm also confirmed a record number of free trials. This positive momentum saw GoPro forecast between 600,000 and 700,000 paying subscribers by the end of 2020. It will be interesting to see how its website, and in particular subscriber numbers, have fared during Q3. If GoPro is on track to meet or better these numbers, GoPro’s share price could get an uplift.
Why should investors care about GoPro’s share price?
High-margin subscription business offers huge potential
Subscription to GoPro Plus costs customers between $50 and $60 a year, depending on the features each user chooses. It includes high-margin services, such as storage and online discounts to its products. InvestorPlace’s Mark Hake is one analyst who is enthusiastic about the potential of the subscription business. He reckons that it’s “highly likely that the subscription business is extremely profitable. While the camera business has gross margins of 30%, the subscription business is likely to have margins at least twice that level.” The way in which subscribers are rising, in tandem with the margins available, supports the recent gains in GoPro's share price and offers hope for the future.
"While the camera business has gross margins of 30%, the subscription business is likely to have margins at least twice that level." - Mark Hake, InvestorPlace
Adapting to the pandemic
GoPro has been taking proactive steps to adapt to the pandemic, developing more versatile ways for consumers to use its products. In July, GoPro launched an update which enables its consumers to use the HERO8 Black camera as a “1080p high-definition, wide-angle webcam for immersive video conferencing, instructional classes and more”, according to Woodman. The company also revealed plans to launch a high-quality live streaming platform for subscribers, adding to the functionality and value of Plus, and enhancing its appeal to prospective clients.
What is Wall Street expecting?
Analysts anticipate Q3 earnings per share of $0.06, with a low estimate of $0.04 and high of $0.10, according to Yahoo Finance. This compares favourably against 2019’s Q3 loss of $0.42 a share. Analysts’ average third-quarter revenue estimate is $234.5m, which would be a 78.80% year-on-year jump.
Looking beyond the next two quarters, analysts are forecasting an upturn in earnings for 2021, with EPS consensus among five analysts of $0.55. The guidance offered in Q3’s earnings will be important here, alongside its latest subscriber growth numbers, with the potential to offer GoPro's share price a timely boost.
However, among the analysts offering 12-month price forecasts with Yahoo Finance, GoPro’s share price has an average target price of $5.08, with a high estimate of $8.00 and a low estimate of $2.50. The average price estimate would represent a 15% decrease from GoPro’s share price of $6.00 at 3 November’s close.
The current consensus among six analysts is to Hold, with 1 Buy, 3 Hold and 2 Sell ratings.
|PE ratio (TTM)||-7.10%|
|Quarterly revenue growth (YoY)||-54.10%|
GoPro's share price vitals, Yahoo Finance, 4 November 2020