It's almost time for our quarterly zoom-in on GoPro (NASDAQ:GPRO). The wearable camera specialist reports third-quarter results shortly after Thursday's market close, and naturally, there's a lot riding on the fresh financials.
GoPro stock has rallied by more than 40% since its springtime bottom. It remains miles removed from its all-time highs -- a dizzying 15-bagger away from taking out its 2014 post-IPO highs -- but the rally over the past six months is encouraging and a welcome respite for roughed-up shareholders. Let's go over a few of the things GoPro management will have to deliver this week if it wants to keep the stock's renaissance on track.
1. Beat the street -- again
Wall Street isn't holding out for much when it comes to the third quarter. Analysts see revenue sliding 17% to $272.3 million, GoPro's fourth consecutive year-over-year quarterly decline. Those same pros see GoPro checking in with a deficit of $0.06 per share, reversing a profit from a year earlier.
The silver lining for investors is that GoPro has posted much narrower losses than what analysts were modeling in each of this year's first two quarters. GoPro stock hasn't trounced the market over the past six months as a result of the back-to-back beats, but it obviously hasn't hurt. Stretching the winning streak to three quarters of narrower-than-expected losses can only help.
2. Hero7 needs to be a game changer
Analysts are holding out for a reversal in the holiday-containing fourth quarter, and the big reason for that is the Hero7 action camera that hit the market just as the third quarter was coming to a close. GoPro announced earlier this month that Hero7 Black -- the priciest of the three Hero7 models with its $399 price point -- had the strongest retail unit sell-through rate of any camera in company history in its first week on the market.
The stock's rally on the encouraging Hero7 news was short-lived, and at least one Wall Street pro isn't impressed. Yuuji Anderson at Morgan Stanley put out a cautious note this week, suggesting that there's minimal evidence of Hero7 Black continuing to sell well and that the lower-priced Silver and White models aren't faring well at all. He has a bearish underweight rating on the stock, with a $5 price target, but the timing of Monday's report -- three days ahead of when the actual GoPro results come out -- is a concern.
GoPro will need to convince the market that things are in fact going well heading into the telltale holiday quarter. Wall Street sees a return to profitability and top-line growth for the quarter, and GoPro executives will need to deliver on those expectations.
3. Other negative trends need reversing
Revenue is declining for the third year in a row, and the 17% increase that analysts are currently targeting for the fourth quarter won't be enough to lift this year out of the hole. Wall Street's bracing for a nearly 3% top-line decline. GoPro stock is also on a losing streak, trading lower for the fourth year in a row despite the strong bounce since bottoming out in April.
A strong report -- and more importantly a buoyant outlook for the fourth quarter and beyond -- could snap both of those negative streaks. GoPro has a long way to go before it's truly back, but every baby step counts at this point. GoPro had better make sure it's not backpedaling on Thursday afternoon.