GoPro Stock Faces An Uphill Climb Going Into Q4 Earnings

Erstwhile tech darling GoPro (NASDAQ:GPRO) is due to report Q4 2015 earnings on 3 Feb 2016 after markets close. During its third quarter earnings call, GoPro said that it expected fourth quarter revenue to decline a whopping 17% Y/Y to $500M-$550M compared to $634M the company posted during Q4 2014, with EPS clocking in at $0.35-$0.45, a huge 47%-59% Y/Y drop. But GoPro added insult to injury when the company recently lowered its revenue guidance again to $437M, a massive 31%Y/Y decline.

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Prior to the third quarter, GoPro had managed to exceed earnings estimates in all its previous earnings calls. Wall Street is currently extremely bearish about the company and expects GoPro to report EPS of just $0.07 and revenue of $539.18M, a 15%Y/Y decline.

GoPro Earnings Surprise History

Source: Nasdaq

There is a fair chance that GoPro might exceed these ultra-low expectations when it reports fourth quarter earnings. It’s quite possible that the company decided to be conservative with its guidance after the third quarter earnings miss. Other than the miss on the bottom line during Q3 2015, GoPro had projected revenue growth of 56% during the quarter but ended up posting only 43% growth. Now 43% growth is certainly robust growth by almost any yardstick. What spooked investors, however, was the company’s huge 13-percentage point miss on the top line which clearly demonstrated that GoPro’s management had been blindsided by events.

GoPro might very well exceed its Q4 2015 earnings estimates, but it will take more than that to restore investor confidence in the company and salvage a stock that is down 40% YTD and has lost more than 80% of its value over the past 12 months.