Here's Why Citigroup Sees Mixed Q1 Earnings Out Of GoPro

In a report published Tuesday, Citigroup analyst Jeremy David previewed GoPro Inc (NASDAQ: GPRO)'s first quarter results and expects the company to deliver a topline beat, but he isn't expecting a large EPS beat.

GoPro will report its first quarter results on April 28 after market close. David estimated the company will earn $0.17 in the quarter on revenue of $346 million. This compares to the Estimize Consensus (16 estimates included) EPS estimate of $0.21 on an estimated revenue of $359.02. The Wall Street Consensus estimate is calling for EPS of $0.17 on revenue of $338.70 million.

According to David's checks, the number of GoPro product reviews posted on BestBuy.com declined only 33 percent quarter-over-quarter, and the number of GoPro app reviews declined only 32 percent quarter-over-quarter. This implies the company's revenue guidance of $335.0 million (down 47 percent quarter-over-quarter) could be considered conservative.

On the other hand, David noted that an EPS beat is unlikely as GoPro has been hiring "aggressively" in the first quarter, potentially increasing its total headcount by 60 percent year-over-year, so any topline strength may not necessarily flow through to a stronger earnings per share.

Bottom line, GoPro's stronger than expected revenue will likely be offset by the risk of rising operating expenditures and a potentially soft gross margin guidance for the second quarter. In addition, the analyst stated that it is "too early" to play the product cycle hype (HERO5).

Shares remain Neutral rated with an unchanged $48 price target.