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Why GoPro, Inc. Stock Popped 13% in August

By Chris Neiger – Sep 8, 2016 at 6:40AM

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An earnings beat by the company and talk of a return to profitability by the end of the year have investors clamoring for GoPro once again.

Image source: Getty Images.

What happened 

Shares of GoPro (GPRO 2.21%) surged 13% in August, according to data provided by S&P Global Market Intelligence, after the company reported its second-quarter earnings (at the very end of July). Investors were pleased to see GoPro beat Wall Street analyst estimates, and were hopeful regarding the company's future after management said that GoPro will likely return to profitability in the fourth quarter of this year. 

So what

If you've been keeping track of GoPro's stock over the past year, you probably noticed that it was down more than 40% YTD before its second-quarter results were announced. So nearly any positive news in the quarter would have turned investor sentiments around.

Analysts were expecting a loss of $0.58 on $194.3 million, but GoPro delivered a loss of $0.52 EPS on $221 million (a 47% drop year-over-year). Of course, that's usually nothing to get excited about, but beating analyst estimates was a win for a stock that's been beaten down so much over the past few months.

Comments from GoPro CEO Nicholas Woodman also helped the company's stock price surge last month. Referring to the company's next camera and new drone, Woodman said in a press release that "HERO5 and Karma will contribute to the largest introduction of products in our history, all in time for what we believe will be GoPro's most exciting fourth quarter, ever -- a quarter where we expect to return to profitability."

Now what

The near-promise of profitability by the fourth quarter clearly helped push up the company's stock last month, but we'll have to wait a few months to see if it all plays out as well as Woodman suggests.

There are a few thing that GoPro investors should be optimistic about. The first is that the company's average selling price (ASP) increased by 14% year-over-year in the second quarter. And its product sell-through outpaced its sell-in by over 50% in the quarter, which indicates that the company has been able to move products quickly. 

GoPro certainly has a long way to go over the next few quarters as it returns to profitability, but it appears that the company is improving key metrics that could make that a reality. 

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GoPro. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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