GoPro (GPRO) stock seemed unable to make up its mind on Wednesday morning, despite posting a monster second quarter, in which both revenue and earnings per share topped estimates.
Sales soared 72% year-over-year — clocking in at $420 million — while earnings per share came in at an adjusted 35 cents. Analysts were calling for revenue of $395 million and EPS of 26 cents.
And yet, after a frankly phenomenal quarter, GPRO stock is wavering. It doesn’t make much sense, especially considering the multitude of bullish catalysts on the company’s horizon.
New Products and Rising in the East
GoPro’s Q2 success was bolstered by the July 6 release of the GoPro Hero+ LCD, a $299 entry-level product aimed at targeting the mass market.
Despite being more affordable than many of GPRO’s other cameras, it’s still more than twice the cost of the company’s cheapest offering, the $129 Hero.
But that’s not the only promising new product helping to drive results from here on out.
Wednesday morning’s indecisiveness on GPRO stock was even more nonsensical when you consider the fact that the company’s third-quarter forecasts also walloped expectations. GoPro expects to deliver non-GAAP EPS between 29 cents and 32 cents on revenue between $430 million and $445 million.
And what, pray tell, were the pros expecting? Wall Street analysts were calling for GPRO stock to post a third-quarter EPS of 23 cents on revenue of $401 million. Clearly, those expectations will need to be adjusted higher.
Results will likely be given a boost by yet another new product launch — the GoPro Hero4 Session — a little thing about the size of an ice cube (that CEO Nick Woodman is fond of putting in his mouth) which debuted earlier this month.
As if there needed to be another reason to cheer GPRO stock in the wake of its blowout quarter, China is just catching on to the GoPro phenomenon, and the country is now one of GoPro’s top 10 markets. (The fact that it wasn’t already gives you some idea of the potential in the East.)
On a day where Apple (AAPL) stock was punished to the tune of 6% for beating EPS and revenue estimates by less than it usually does, I suppose the GPRO stock move makes a little more sense.
But the company has so many avenues for growth — it’s also launching a content-licensing platform and plans to get into virtual reality and drones in the near future — that I cannot endorse today’s negative market reaction.
For investors following GPRO and thinking about picking up some shares, today’s pullback looks like the perfect opportunity.
As of this writing, John Divine was long shares of AAPL stock.
