GoPro Q3 earnings likely to be hurt by production delays

GoPro Inc. (NASDAQ: GPRO) is set to report its third-quarter earnings results on Thursday after the market closes. The camera maker is likely to be hurt by production delays of the Hero8. The shipments will shift from Q3 to Q4 of 2019, resulting in a significant revenue shift.

The delay is shipment is likely to hurt the results as the company depends substantially on the sale of cameras, mounts and accessories for revenue. Apart from this, GoPro derives revenue from the related implied post-contract support to customers and subscription services.

Also, the company continues to make significant investments in research and development. The timing of new product releases continues to have a significant impact on revenue as the company is struggling in the area of introducing new cameras and mobile applications. The international markets represent a significant growth opportunity for GoPro.

Apart from this, the total market for digital cameras continued to decline as smartphone and tablet camera quality has improved. The markets remained highly competitive as GoPro’s competitors have narrowed the gap in new product introductions. The company’s future growth depends on continuing to reach, expand and re-engage with the core user base.

For the third quarter, revenue is expected to be in the $123-127 million range and adjusted loss in the range of $75-65 million. The company is predicted to end Q3 with cash and cash equivalents of about $80 million while expecting to increase cash sharply during Q4 and to end the year with about $200 million of cash.

Analysts expect the company to report a loss of $0.48 per share on revenue of $126.35 million for the third quarter. In comparison, during the previous year quarter, GoPro posted a loss of $0.04 per share on revenue of $285.94 million. The company has surprised investors by beating analysts’ expectations thrice in the past four quarters.

Read: Dropbox Q3 earnings preview

For the second quarter, GoPro reported a narrower loss as distribution revenue drove the top line higher. The company shipped 1.08 million camera units, up 1% over the prior-year period. As of July 31, Plus subscribers surpassed 252,000, up 50% over last year and surged 15% over the first quarter.

Looking ahead into the second half of 2019, the company’s outlook is likely to outperform the market expectations driven by the continued sell-through momentum, channel inventory levels and the strength of new products slated for later this year. For the full year 2019, the top line is expected to grow at 6-9% to $1.215-1.25 billion and adjusted earnings of 30-35 cents per share.

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