GoPro (NASDAQ:GPRO) announced strong fourth-quarter 2018 results on Wednesday after the market closed, detailing an admirable performance during the crucial holiday season and continued cost-cutting as the action camera specialist strives to return to sustained, profitable growth. 

Shares initially surged more than 6% this morning, but ultimately gave up those gains to trade roughly flat as of 3 p.m. EST on Thursday as the market absorbed the news. Let's pan out, then, to get a clearer picture of GoPro's holiday quarter.

GoPro HERO 7 camera falling into water

Image source: GoPro.

GoPro's results: The raw numbers

Metric

Q4 2018

Q4 2017

Year-Over-Year Growth

Revenue

$377.4 million

$334.8 million

12.7%

GAAP net income (loss)

$31.7 million

($55.8 million)

N/A

GAAP earnings (loss) per share

$0.22

($0.41)

N/A

Data source: GoPro. 

What happened with GoPro this quarter?

  • Revenue arrived near the high end of GoPro's guidance provided in November, which called for a range of $360 million to $380 million. 
  • On an adjusted basis -- which excludes items like stock-based compensation and restructuring costs -- GoPro's net income was $42.4 million, or $0.30 per share, above consensus estimates for $0.25 per share. In the year-ago period, the company had an adjusted net loss of $41.3 million (negative $0.30 per share).
  • Adjusted gross margin expanded 5 percentage points from the previous quarter, to 38%.
  • Adjusted EBITDA was $58.8 million, swinging from an adjusted EBITDA loss of $26.5 million in last year's fourth quarter.
  • GoPro reduced adjusted operating expenses by $22 million, or 18% year over year this quarter.
  • Camera units shipped increased 3.8% year over year to 1.413 million. 
  • Camera unit sell-through climbed 20% year over year in the fourth quarter, and 9% for all of 2018.
  • GoPro captured 97% of total dollar share and 87% unit share of the action camera category in the U.S. this quarter.
  • GoPro.com sales grew over 50% to represent 10% of total revenue.
  • Average selling price grew 9% year over year to $267. 
  • The Fusion spherical camera captured a 47% dollar share of its respective market.
  • GoPro Plus subscribers grew 50% year over year and 8% from last quarter, to approximately 199,000.

What management had to say

"Thanks to a strong product lineup and efficient execution, GoPro grew both camera unit sell-through and market share in 2018, resulting in GAAP profitability in the fourth quarter and second half of the year," said CEO Nick Woodman. "With this momentum and a continued focus on expense management, we're planning for growth and profitability in 2019."

Looking forward

For the full year of 2019, GoPro expects revenue to increase between 5% and 8% from $1.148 billion in 2018, which roughly equates to between $1.21 billion and $1.24 billion. On the bottom line, that should translate to 2019 adjusted EPS in the range of $0.20 to $0.40. Here again, the midpoint of both ranges stands comfortably above analysts' consensus estimates for earnings of $0.26 per share on revenue of $1.20 billion. 

To be clear, GoPro is assuming it will be able to keep operating expenses flat this year while both unit sell-in and sell-through increase. GoPro also believes average selling prices will continue to rise as its sales mix shifts toward higher-end cameras. And it anticipates it will be able to lure more subscribers to its $4.99-per-month GoPro Plus service thanks to expanded marketing and service enhancements. 

Still, GoPro has plenty of work to do in order to ultimately return to GAAP profitability and sustained top-line growth over the long run. Doing so will require maintaining its success with disciplined operational execution and compelling new products and services year after year. So while GoPro is right to call this holiday season a success, it seems investors aren't yet convinced the stock is worthy of a place in their portfolios, with shares trading modestly lower as of this writing.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends GoPro. The Motley Fool has a disclosure policy.