GoPro's Q4; Was The New HERO A Zero?

William Power of Baird downgraded shares of GoPro Inc GPRO after the company reported its fourth-quarter results on Thursday.

According to Power, GoPro's earnings were roughly in line with what he had expected, but the company's first-quarter guidance was disappointing at a time when the new HERO5 camera is expected to perform well.

GoPro guided its first-quarter revenue to be $200 million (plus or minus $10 million) and a gross margin rate in the low 30s. The analyst noted that the guidance implies a 63 percent revenue drop sequentially.

A Look Ahead

Looking forward to the full fiscal year, the company still expects to reach profitability, but the analyst believes it needs to collect more than $1.5 billion in revenue. Given the $200 million revenue guidance to kick off 2017 coupled with product upgrades only coming in the bottom half of the year, management's outlook could be overly optimistic.

Power is estimating total revenue for 2017 will be just $1.29 billion, which also implies an earnings per share loss of $0.49 per share.

It is also important to note that GoPro's cash balance stands at $218 million, down from $474 million a year ago. This poses the risk of reducing the company's financial flexibility moving forward.

Finally, the analyst suggested that it is possible a strategic buyer could emerge and acquire GoPro as its brand remains strong. However, it is difficult to ascertain for sure who would emerge as a potential buyer and what price they would pay.

At last check, shares of GoPro were down 12.35 percent on the day at $9.61.