Stock Story -
Action camera company GoPro (NASDAQ:GPRO) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue down 22.7% year on year to $186.2 million. It made a non-GAAP loss of $0.24 per share, down from its loss of $0.11 per share in the same quarter last year.
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GoPro (GPRO) Q2 CY2024 Highlights:
- Revenue: $186.2 million vs analyst estimates of $170 million (9.5% beat)
- Adjusted EBITDA: ($33.4) million vs analyst estimates of ($35.8) million (beat)
- EPS (non-GAAP): -$0.24 vs analyst estimates of -$0.25
- Gross Margin (GAAP): 30.5%, down from 31.4% in the same quarter last year
- Adjusted EBITDA Margin: -17.9%, down from -4.3% in the same quarter last year
- Free Cash Flow was -$111,000 compared to -$99.37 million in the previous quarter
- Market Capitalization: $201 million
Known for sponsoring extreme athletes, GoPro (NASDAQ:GPRO) is a camera company known for its POV videos and editing software.
Toys and ElectronicsThe toys and electronics industry presents both opportunities and challenges for investors. Established companies often enjoy strong brand recognition and customer loyalty while smaller players can carve out a niche if they develop a viral, hit new product. The downside, however, is that success can be short-lived because the industry is very competitive: the barriers to entry for developing a new toy are low, which can lead to pricing pressures and reduced profit margins, and the rapid pace of technological advancements necessitates continuous product updates, increasing research and development costs, and shortening product life cycles for electronics companies. Furthermore, these players must navigate various regulatory requirements, especially regarding product safety, which can pose operational challenges and potential legal risks.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. GoPro's demand was weak over the last five years as its sales fell by 4.9% annually, a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. GoPro's recent history shows its demand has stayed suppressed as its revenue has declined by 11% annually over the last two years.
This quarter, GoPro's revenue fell 22.7% year on year to $186.2 million but beat Wall Street's estimates by 9.5%. Looking ahead, Wall Street expects sales to grow 5.4% over the next 12 months, an acceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
While GoPro's free cash flow broke even this quarter, the broader story hasn't been so clean. Over the last two years, GoPro's demanding reinvestments to stay relevant have drained its resources. Its free cash flow margin was among the worst in the consumer discretionary sector, averaging negative 3.5%.
GoPro broke even from a free cash flow perspective in Q2. This quarter's result was good as its margin was 3.4 percentage points higher than in the same quarter last year, but we wouldn't read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.
Key Takeaways from GoPro's Q2 Results We were impressed by how significantly GoPro blew past analysts' revenue and adjusted EBITDA expectations this quarter. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock traded up 2.3% to $1.34 immediately following the results.
