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Analyzing GoPro’s Operational Efficiency

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Aug. 10 2015, Published 1:11 p.m. ET

Direct selling empowered operational efficiency

The income from operation rose from $49.1 million to $65.8 million in 2Q15 with an overall rise of 34.10% over the previous quarter. It rose 269.90% from the same quarter the previous year. The iShares Russell Mid-Cap (IWR) has 0.07% exposure to GoPro (GPRO). It’s more focused towards direct selling. GoPro has seen a rise in its direct selling to $197.8 million in 2Q15—from $162.4 million over the previous quarter and $129.8 million over the same quarter the previous year. This resulted in a reduction of variable expenses. It leads to a rise in the operating margin of 220 bps (basis points) from 13.50% to 15.70% over the previous quarter and 840 bps over the same quarter the previous year.

GoPro sells ads on Google’s (GOOG) Youtube and the Xbox platform to influence direct selling. Xbox also allows customers to buy GoPro camera’s through the Microsoft (MSFT) store. They’re in agreement to share the revenue equally.

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GoPro reported net income of $50.7 million in 2Q15 compared to $35.6 million the previous quarter—a rise of 42.41%. It was 329.66% over the same quarter the previous year. The diluted EPS (earnings per share) rose to $0.35 in 2Q15 from $0.24 in the previous quarter. It beat Wall Street’s estimates of $0.26.

GoPro struggles to maintain inventory

Even though there’s a rise in EBITDA (earnings before interest, tax, depreciation, and amortization) and net income, GoPro reported a fall in its cash flow from operation by -14.20% in 2Q15—compared to the previous quarter. The reason for the fall could be the inventory. It got a high pick. The inventory was $219.3 million in 2Q15—a rise of 33.70% over the previous quarter of $164 million. It rose 172.8% compared to the same quarter the previous year. Its daily sales inventory rose by 18.20% in 2Q15 compared to the previous quarter.

GoPro is part of the iShares Russell Mid-Cap (IWR) and the iShares Russell 1000 growth ETF (IWF). They have holdings of 0.07% and 0.04%, respectively.

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