Goldman Sachs Sees Several Positives Going Into GoPro's HERO5 Launch

GoPro Inc (NASDAQ: GPRO) reported a strong F2Q, and HERO5 and drone launch appears to be on track for the Holidays, Goldman Sachs’ Simona Jankowski said in a report. He maintained a Neutral rating on the company, with a price target of $11.

GoPro reported its June quarter sales at $221mn, ahead of the Street expectations of $194.6mn. Non-GAAP EPS came in at ($0.52), better than the Street estimate of ($0.58). The company maintained its FY16 revenue guidance at $1.35-$1.50bn.

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HERO5 And Karma Launch

“We see several positives into the fall launch of the HERO5 and Karma drone,” analyst Simona Jankowski wrote. He mentioned that these positives include:

• Low channel inventory, with GoPro’s own inventories having declined to the lowest level in 2 years
• Positive feedback from retailers on Holiday shelf space
• Localization efforts, which would likely boost traction in several markets like Germany, France, Portugal, Japan and Korea

GoPro’s 2H guidance reflects 152 percent h/h revenue growth, versus its 3-year average of 42 percent. Jankowski pointed out, however, that taking the higher 1H sell-through and expected drone revenues, the implied action camera h/h growth is closer to 30-50 percent, based on sell-through ASP assumptions.

“At the mid-point of guidance and excluding our drone revenue assumptions of $39mn, 2H action camera revenues would be 7% above 2H14 when the HERO4 was launched – an achievable target given GoPro’s expanded global footprint since then,” the analyst stated. He added that GoPro had projected its 2H gross margins at 40 percent, below the Goldman Sachs estimate of 43 percent.

The non-GAAP EPS estimates for FY16, FY17 and FY18 have been reduced from ($0.85) to ($1.11), from $0.45 to $0.20 and from $0.50 to $0.34, respectively.

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