GoPro Inc (NASDAQ:GPRO) Needs to Win Back Wall Street With a Strong Quarter

GoPro (NASDAQ:GPRO) Hero 4

GoPro Inc will report third-quarter results after the close of trade on Wednesday. The stock has shed more than half its market value in the past three months.

Analysts first grew cautious after the August-launched Hero4 Session failed to gain traction. GoPro had to finally lower the cost of the device by $100 to create demand.

GoPro (NASDAQ:GPRO) Hero 4

More bad news followed last month. Weak outlook from key supplier, Ambarella, forced GoPro Inc ’s stock to plunge to fresh lows.

And then came the shocker from Morgan Stanley. Analyst James Faucette slashed the price target on GoPro by almost half from $62 to $35. He argued that the weaker than expected sales of Session could be a “harbinger of future disappointments.”

Obviously, Wall Street doesn’t expect any fireworks from the just concluded quarter. But CNBC’s Alex Rosenberg thinks the action camera maker could be a surprise package of this earnings season.

GoPro Could Surprise on Earnings

He bases his optimism on a comparison between the average analysts’ estimate and the crowd sourced projections generated by Estimize. The financial upstart claims its figures are more accurate than the Street at least 70 percent of the time.

The consensus of analysts covering the stock is for earnings of 29 cents per share, which would be a penny below the firm’s guidance. But Estimize expects EPS of 33 cents.

GoPro Inc has topped the Estimize forecast in every quarter since the period ending September 2014  The Estimize call is further backed by options market data that shows a 15 percent upside for GoPro’s stock.

Revenue Should Also Come in Strong

Sell-side analysts project GoPro to record revenues of $433 million, according to FactSet. In the year-ago period, the firm posted revenue of $280 million. Contributors to Estimize have forecast revenue of $443.4 million. GoPro has managed to beat the Estimize forecast in each of the last four quarters.

Besides the top-line and bottom-line, investors will also be keep a tab on the expenditure front. During last quarter’s earnings call, GoPro Inc CFO Jack Lazar said operating expenditures would likely increase to as much as $145 million for the quarter, from $129 million in the prior quarter. He attributed a bulk of the increase due to higher spending on research and development.

The sell-off during the last few months has left GoPro’s stock at attractive valuation. But investors are scared to get on board due to the increased volatility. Most of that volatility stems from negative comments from one analyst or the other. If GoPro has to silence its critics on Wall Street, it needs to deliver a stellar quarter.

Shares of GoPro Inc closed Monday at $28.79.

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