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What to Watch When GoPro, Inc. Reports

Image source: GoPro.

With GoPro Inc. (NASDAQ:GPRO) stock down more than 70% over the past year as of this writing despite its painful fourth-quarter report in February, investors can't help but wonder if the action camera specialist may have found its bottom this year. But the market may receive a strong indication of whether that's the case when GoPro releases first-quarter 2016 results this Thursday, May 5, after the market close.

So what, exactly, should GoPro investors be watching when its report hits the wires?

Recall three months ago, GoPro issued guidance for first-quarter revenue of $160 million to $180 million, representing a harrowing decline of over 53% from the same year-ago period. Trending toward the bottom line, that should translate to adjusted gross margin of 36%, plus or minus 100 basis points, while adjusted earnings before interest, taxes, depreciation, and amortization (EBTIDA) should be a loss of $96 million, plus or minus $2.5 million.

To its credit, the first quarter is seasonally slow for GoPro, anyway. And this decline can at least partially be chalked up to the company's strategic decision last quarter to narrow its core capture device lineup to only its three devices in the HERO4 Black, HERO4 Silver, and HERO4 Session models. According to CFO Jack Lazar during last quarter's conference call, this should also mean the Session, priced at $199, will comprise a significantly higher percentage of total revenue, even as the higher-end HERO4 Black ($499) and Silver ($399) together should continue to contribute more than 50% of total sales. In addition, sell-through should be significantly higher than sell-in during the quarter, enabling global channels to reduce a troublesome glut in inventory.

Relatedly, look for color on GoPro's most recent market share...