GoPro's new Hero 5 Black camera. Image source: GoPro, Inc.
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Shares of GoPro, Inc. (NASDAQ: GPRO) were down 11% as of 12:00 p.m. EST Friday after the action camera and drone specialist released mixed fourth-quarter 2016 results and disappointing guidance.
Quarterly revenue climbed 23.8% year over year, to $540.6 million, and -- based on generally accepted accounting principles (GAAP) -- translated to a net loss of $115.7 million, or $0.82 per share. On an adjusted (non-GAAP) basis, which adds perspective by excluding items like stock-based compensation, $102 million for a full valuation allowance on U.S. deferred tax assets, and almost $37 million in restructuring costs, GoPro generated net income of $42.4 million, or $0.29 per share.
GoPro's latest guidance called for higher fourth-quarter revenue of $600 million to $650 million, and adjusted earnings per share of $0.25 to $0.35. To be fair, this was before the recall of GoPro's Karma drone -- which was expected to account for around 10% of overall sales -- in November. But even then, analysts' consensus estimates predicted GoPro would deliver higher fourth-quarter revenue of $574.5 million, albeit with lower adjusted earnings of $0.22 per share.
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During the subsequent conference call, CEO Nick Woodman reminded investors that production issues held back the initial launch of GoPro's Hero 5 Black camera last quarter. And though the company quickly ramped production after resolving those issues, Woodman says, "The initial scarcity had a knock-on effect, resulting in retailers canceling marketing support for the Hero 5 Black launch."
To be fair, it's difficult to measure how much that missed marketing opportunity hurt sales. But it did GoPro no favors happening ahead of the crucial holiday season.
As it stands, GoPro has relaunched Karma in limited quantities in the U.S., and expects to expand its availability to international markets this spring. But in the meantime, GoPro expects first-quarter revenue of $190 million to $210 million, significantly below analysts' estimates for $264.5 million.
Looking further out, GoPro set a goal of reducing adjusted operating expenses by more than $100 million in 2017, to below $600 million, with the aim of recapturing sustained profitability over the long term.
Given GoPro's top-line miss in the key holiday quarter, however, and its underwhelming guidance to start 2017, it's hard to blame investors for bidding down GoPro stock today.
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Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GoPro. The Motley Fool has the following options: short January 2019 $12 calls on GoPro and long January 2019 $12 puts on GoPro. The Motley Fool has a disclosure policy.