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What Could Drive GoPro Stock

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Apr. 25 2019, Published 11:42 a.m. ET

Return to revenue growth

GoPro (GPRO) may no longer be a sinking ship. The company’s holiday sales in the last quarter left investors happy. Analysts expect its sales to grow 6% this year, and its earnings to expand by 225%.

However, analyst forecast flat sales for GoPro in 2020, and a sales decline in 2021. They expect its earnings to grow by just 10% over the next five years, suggesting its EPS could contract yet again in 2021. The company is still struggling to be GAAP profitable.

In 2015, GoPro reported record sales of $1.62 billion, with an 8.7% operating margin and a 2.2% net margin. The company seems unlikely to post sales close to its 2015 levels, at least in the near future.

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Stock rebounds from an all-time low

GoPro stock has made a stellar comeback this year, gaining 48% year-to-date. The stock rebounded after GoPro beat sales estimates in the holiday quarter. However, the stock ended last year near an all-time low.

Last year, GoPro launched products across price points to target multiple customer segments. While lower-priced products boosted its shipments sold, they also reduced GoPro’s average selling prices and profit margins.

Although GoPro’s subscription sales rose 50% in 2018, they account for just a small part of its total sales. This revenue’s expansion could boost its margins. GoPro plans to continue spending on marketing and research and development as new products are launched. To keep investors interested, GoPro needs to achieve consistent revenue and earnings growth.

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