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GoPro Inventory Sell-Through Clears The Way For Critical Holiday Season

GoPro Inventory Sell-Through Clears The Way For Critical Holiday Season - GoPro NASDAQ:GPRO

GoPro Inc GPRO 14.43% shares are up 7.6 percent following a big Q2 earnings beat. Barclays analyst Joseph Wolf sees the quarter as solid, but believes this year’s holiday season will tell the true story of GoPro’s future.

Wolf noted opex came in a bit higher than expected in Q2, but the company took positive strides in the most important part of the its strategy: cleaning up its inventory channel prior to the launches of the Hero5 and Karma drone.

“Unit sell-through was up 10 percent sequentially and was more than 50 percent higher than sell-in for the second quarter in a row which resulted in a 35 percent sequential reduction in channel inventory,” Wolf reported.

Overall, GoPro lowered its inventory level from $140 million to $90 million, its lowest level since Q2 of 2014.

“This bodes well ahead of the launch of both Hero5 and Karma but we believe investors may prefer to take a wait-and-see approach to sales before getting excited given the issues that plagued the company’s last new product launch,” Wolf explained.

According to Wolf, the lack of financial details surrounding the Karma and the Hero5 make it difficult to forecast the devices' ultimate impact on the company’s bottom line.

Barclays believes the success or failure of the new devices will be a telling sign of whether or not GoPro’s customer base has reached its saturation point.

The firm maintains an Equal-Weight rating on GoPro and a $12 price target for the stock.

At time of writing, GoPro was up 14.26 percent on the day, trading at $13.22.

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Disclosure: The author holds no position in the stocks mentioned.

DateFirmActionFromTo
Jun 2016Longbow ResearchInitiates Coverage onNeutral
Feb 2016Dougherty & CompanyDowngradesBuyNeutral
Feb 2016Sterne Agee CRTDowngradesBuyNeutral

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