GoPro (GPRO) Bullish On 2H19 Despite Tariff War Escalation

GoPro Inc.’s (NASDAQ:GPRO) management has boosted investor sentiments by reaffirming that the continued trade war between the United States and China would have no bearing on its performance in the second half of the year. The company attributed much of this optimism to its strategic move of shifting the production of most of its U.S.-bound cameras from China to Mexico in the wake of escalating bilateral trade conflict between the world’s two largest economies.

GoPro revealed that it has already began the production of majority of its U.S.-bound cameras in Guadalajara, Mexico, to support sales. In addition, the company is focusing on proactive inventory management and realigning its supply chain mechanism to offset the adverse impact of the trade war.

Backed by these prudent steps, along with a positive feedback from both channel and retail partners on the fall product lineup, GoPro remains bullish on the second half of 2019. The company expects its product mix to be skewed to the premium category, leading to average selling price of above $280 per camera for the year.

For the second half of the year, GoPro expects revenues to be in the range of $715 million to $746 million, with gross margin in the vicinity of 37.5%. Non-GAAP earnings for the period is expected to be within 37 cents to 49 cents per share. Consequently, for full-year 2019, the company expects top-line improvement of 9-12% to $1.25-$1.28 billion, up from earlier expectations of 7-10% growth. While gross margin for the year is likely to be 36.5%, non-GAAP earnings are anticipated to be in the range of 35 cents to 45 cents per share.

Further, the action video camera maker intends to translate the healthy momentum in its business along with controlled cost into growth and profitability in 2019, while limiting operating expenses below $400 million. GoPro is also making investments in merchandising and retail advertising to drive a bigger brand presence while continuing to innovate. It intends to expand footprint in emerging markets like India and is focused on scaling its CRM efforts to augment customer base.

GoPro has expanded its Damaged Camera Replacement policy as part of the GoPro Plus subscription service. As a result, the company’s users in Germany, France, Spain, Japan, Australia and 25 other countries, can go on any adventure knowing that if their devices get damaged, the company will replace it, no questions asked. GoPro further integrated its PLUS Subscription service into the GoPro.com checkout experience. This will offer customers the opportunity to effortlessly subscribe to PLUS when purchasing a camera. Notably, the company is witnessing consistent global PLUS subscriber addition, and expects to accelerate the growth momentum with this move.

Over the past year, the stock has recorded an average decline of 36.2% compared with the industry’s fall of 3.4%.

GoPro currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader industry are Weight Watchers International Inc (NASDAQ:WW) , sporting a Zacks Rank #1 (Strong Buy), and BrightView Holdings, Inc. (NYSE:BV) and SP Plus Corporation (NASDAQ:SP) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Weight Watchers International has a long-term earnings growth expectation of 15%. It delivered average positive earnings surprise of 16.1% in the trailing four quarters, beating estimates on each occasion.

BrightView Holdings has a long-term earnings growth expectation of 19%. It delivered average positive earnings surprise of 3.8% in the trailing four quarters, beating estimates twice.

SP Plus has a long-term earnings growth expectation of 10%. It delivered average positive earnings surprise of 17.5% in the trailing four quarters, beating estimates on each occasion.

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