GoPro's Q3 Report Was A Catastrophe

While GoPro Inc GPRO's Q3 results were expected to be poor, the magnitude of the Q3 miss was “shocking,” BlueFin's John Donovan said in a report. He added that the company’s Q4 outlook was also disastrous.

Catastrophic Results

Terming the Q3 results as “frightening,” analyst Donovan noted that units were reported at 1.02 million, versus BlueFin's 1.05 million estimate and the consensus expectation of 1.12 million. ASPs declined by around $50 sequentially to ~$236, which added to the angst.

GoPro cited issues with HERO5 production and the inability to fill the channel as the main reason for the weak results. Moreover, Amazon.com, Inc. AMZN has stopped selling the product.

“As we stated last week, these new product launches have not gone smoothly and we were surprised that our supply chain reads indicate that builds remain intact from prior updates, despite tepid demand, additional delays to Karma, and suspension (temporarily, albeit a suspension) of sales via AMZN,” Donovan wrote. Amazon represents about 15 percent of GoPro’s sales.

Outlook Poor

The analyst expressed concern regarding the pricing matrix, since the high-end HERO5 Black is priced at $399 [$100 less than the HERO4] and could exert pressure on the company’s margins. The HERO5 Session is priced at $299 and could be considered too expensive.

GoPro’s guidance came in 10 percent short of the consensus. “We had been projecting CQ4 revenues in the $610 million range, as much as $65 million below consensus and as much as $100 million below many other analysts’ estimations,” Donovan added.

GoPro’s performance spells bad news for Ambarella Inc AMBA, since the former accounts for 30–32 percent of the latter’s revenue.