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Is GoPro on Track to Achieve Revenue and Profitability Targets?

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Share price rises 45% since 2Q16 results

GoPro (GPRO) announced its 2Q16 results on July 27, 2016. The firm beat analyst revenue and EPS (earnings per share) estimates comfortably. Since GoPro announced its 2Q16 results, its share price has risen 45%, driven by earnings as well as the launch of Karma and the HERO5 line of cameras.

As shown in the chart below, GoPro’s revenue growth has been significant in the last five years. Revenue rose from $234 million in fiscal 2011 to ~$1.6 billion in fiscal 2015. Notably, GoPro was founded in 2004 and was publicly listed in 2014.

However, driven by channel inventory reductions, the company’s revenue fell 47% YoY (year-over-year) in 2Q16. Although GoPro’s revenue rise has been impressive since fiscal 2011, it has fallen drastically YoY in the last three reported quarters.

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Shares of GoPro dipped in September 2016

GoPro’s shares fell more than 2% on September 26 and September 27, 2016, after China’s SZ DJI Technology launched a drone camera. Snap also introduced Spectacles in the camera market on September 24, 2016.

These companies launched their products after GoPro introduced Karma and a new Hero5 camera on September 19, 2016. This new development should increase competition in the camera market.

Expected revenue in fiscal 2016

GoPro expects to post revenue between ~$1.4 billion–$1.5 billion in fiscal 2016. The company expects revenue growth in 3Q16 and 4Q16, with a gross margin of ~40%. GoPro noted that it expects its operating expenses to “grow modestly” in the second half of 2016. The company expects to return to profitability in the last quarter of fiscal 2016.

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