GoPro (NASDAQ:GPRO) shares are down more than 13% today, as it reported disappointing earnings. Although GPRO beat analyst estimates of $237.7 million, reporting $244.6 million, it also reported a loss of $0.08 per share, compared to estimates of a gain of $0.06 per share. However, excluding one-time charges, such as IPO expenses, GPRO earned $0.08 per share. Nonetheless, GPRO was trading at a level that suggested revenue growth would exceed estimates. Revenue only grew at 38% y/y and a paltry 3.8% q/q. With a market capitalization of nearly $10 billion, sales increases of 3.8% q/q to the mid-$200 million level will not be enough to sustain its trading multiples.
GoPro's share price has tremendous revenue growth priced in. Many opine that GoPro could achieve this by selling the video it captures. However, there are numerous headwinds from achieving that end. First and foremost, GoPro does not own the rights to that video so it most likely would have to share revenue generated. Secondly, it is not clear that there is much value in that footage. GoPro currently provides footage to Virgin America for free. Finally, investors cite its YouTube Channel as a potential revenue generating method, but upon reviewing the possible revenue generated from this, it is evident that it will not move the needle.
In my previous article, "GoPro-Irrational Exuberance Propelling It To Unsustainable Levels," I discussed the numerous headwinds that were apparent and would prevent GoPro from justifying its lofty valuation. With the looming threat of share lock-ups expiring, and negative sentiment from a disappointing earnings release, GoPro will see the momentum flee further from its share price.
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