Shares of GoPro Inc. spiked to three-year highs on Friday, after the wearable action camera maker posted a third-quarter profit on revenue more than doubled, beating Wall Street expectations thanks to its massive profit margin. .
Oppenheimer analyst Andrew Uerkwitz followed by raising his share price target by 25%, from $ 8 to $ 10, said the implementation of GoPro’s strategic transition to a subscription model and direct to consumer (DTC), announced just two quarters ago. , was “remarkable.” He reiterated the better ratings he has per share for at least the past two years.
Uerkwitz wrote in a client note: “As execution continues and confidence increases in a steady stream of cash flows over the years, we believe there will be significantly more advantages.”
24.2% spike in morning trading, to trade above the $ 8 mark for the first time since December 2017. As of now, it has soared 89.4% year-on-year, to increase GoPro’s market cap to $ 1.30 billion.
Meanwhile, Nasdaq Composite COMP,
has risen 32.0% this year and the S&P 500 SPX,
has increased by 8.5%.
The company reported net income late Thursday of $ 3.3 million, or 2 cents a share, after losing $ 74.8 million, or 51 cents a share, for the same year. before. Excluding the non-repeatable item, GoPro turned to an adjusted earnings per share of 20 cents from a loss per share of 42 cents, beating FactSet EPS consensus of 6 cents.
Chief Financial Officer Brian McGee said: “In the third quarter of 2020, our direct-to-consumer and subscription-centric strategy expanded margins, increased subscribers, and significantly reduced spending. operating fees, resulting in GAAP and non-GAAP profits ”. “This approach also allows for effective working capital management as we drive it [days sales outstanding] sequentially reduce 25%, reduce channel inventory and reduce our investment in inventory ”. (GAAP refers to generally accepted accounting principles, and not GAAP refers to adjusted income.)
Revenue increased 113.9% to $ 280.5 million, much higher than the FactSet consensus of $ 234.5 million. Number of subscribers increased 65% to 501,000.
Gross margin improved to 35.4% from 21.7%, with average selling price increasing 11% to $ 304.
Founder and CEO Nicholas Woodman said: “Q3 was very strong for GoPro from start to finish, culminating in the successful launch of our stunning new flagship, HERO9 Black.
Wedbush analyst Michael Pachter follows by lifting his share price target to $ 8 from $ 6, as the results show that the company’s strategic change is smooth. However, he reiterated the neutral rating he has on stocks since no later than January 2018, citing valuation.
JP Morgan’s Paul Belden reiterated his neutral rating and kept his share price target at $ 8, but is also optimistic about GoPro’s strategic change.
“The move to subscription services brings greater visibility to the customer base, more stable cash flow, and a good pathway for future camera accessories and upgrades,” Belden writes. .