What happened
Shares of GoPro (GPRO 5.00%) got hammered on Friday, after the company reported earnings for the second quarter of 2020. Q2 revenue fell a whopping 54% year over year, and that likely caught many investors off guard. After all, the company recently issued a business update painting a much different picture.
As of 3 p.m. EDT, GoPro stock was down 13%. And it could have further to fall considering it's still beating the market in 2020.
So what
In a May 29 press release, GoPro announced record camera sales. But when researching stocks, investors have to read carefully, looking past the headline numbers. In this case, the record sales applied to a four-day period coinciding with Memorial Day weekend. It was a record four-day period, but only when excluding the holiday season and new camera launches. That's hardly a record.
The press release further pointed to a 500% year-over-year surge in weekly demand starting in April. Record sales and 500% increase in demand sounded very bullish, and GoPro stock kept climbing as a result. But look a little closer, and the increased demand was only for sales on GoPro.com, not for cameras in general.
GoPro's Q2 earnings release showed sales on GoPro.com did indeed surge and accounted for 44% of overall revenue. However, total revenue plunged a drastic 54% as retail channels sold far fewer cameras than last year. Furthermore, GoPro ended up with a net loss of $51 million -- a troubling decline from its $11 million loss last year.
GoPro is still the tenth most popular stock on the brokerage platform Robinhood. Many investors receive the stock for free for signing up. After a quarter like this, many might be wondering what to do with their GoPro stock.
Image source: Getty Images.
Now what
If there's a silver lining, it's that GoPro actually exceeded its guidance for camera sell-through. In May, it expected 600,000 to 650,000 units to sell through in Q2. In reality, 750,000 cameras sold through -- beating the high end of guidance by 15%. And with 44% of those sold directly to the consumer, GoPro has an opportunity to build a more direct customer relationship going forward.
For guidance, GoPro expects third-quarter revenue of $220 million to $250 million. That's a 79% increase from the third quarter of 2019, but down 18% from the third quarter of 2018. For 2020, it's forecasting a slight decline in camera sales but a slight uptick in revenue when compared to 2019.
In the end, there's just not much revenue growth with GoPro stock. And until the company can grow its bottom line, it'll be hard to justify holding shares for the long term.
