GoPro Falls as Doubts Persist on Wall Street About a Turnaround

(Bloomberg) -- GoPro Inc.'s shares fell after announcing higher-than-projected sales that failed to convince investors its plan to reverse the company's declining fortunes is working.

The action camera maker, a darling of Wall Street when the company went public three years ago, has struggled to show it can move beyond its niche market, increase revenue and, eventually, turn a profit. In the past year, the company has announced product delays, recalls and disappointing earnings, spurring Chief Executive Officer Nick Woodman to eliminate hundreds of jobs and abandon an entertainment division as he tries to reshape the once-bloated company.

GoPro reported sales gained 19 percent to $218.6 million in the quarter ended March 31, and said second-quarter revenue should be $260 million to $280 million, surpassing analysts' average projection. The San Mateo, California-based company forecast second-quarter adjusted gross margins of as much as 34.5 percent, missing analyst estimates of 37.3 percent.

“The results don't give us sufficient evidence to know one way or another if the turnaround is going to work,” said Robert Stone, an analyst at Cowen & Co. “We know there are new products coming, but we have to wait and see if they arrive on time and if performance is as expected.”

Shares declined 6.5 percent to $8.36 at 12:22 p.m. in New York, after earlier falling as much as 8.3 percent. The company has lost more than one-third of its value over the past year.

GoPro is betting that it can avoid last year's missteps after the company's restructuring. But it still faces competition in the drone market from DJI, the Chinese company that's the market leader, and the challenge of broadening its saturated user base from adventure seekers to a more mainstream audience.

“We're more focused, doing fewer things better, and that's starting to pay off in expectations and results,” Chief Operating Officer CJ Prober said in an interview. “The flatter organization is leading to better collaboration, more transparency, and better decision-making.”

The company reported a loss, excluding some costs, of $62.8 million, or 44 cents a share, in the quarter, in line with analysts' estimates.

Prober said sales of the Karma drone, which was off the shelf for several months after the company recalled the product in November for a battery issue, are beating internal company projections. International revenue accounted for 60 percent of total sales, the highest ever, and helped drive growth.

GoPro rolled out a trade-up program last month to entice former customers back to the brand. Thousands of people have participated, Prober said. Like Fitbit, GoPro has to defend itself from being relegated to the junk drawer after consumers use the gadgets only a few times. Prober is betting that it can bring back former GoPro users with the newer cameras that have better software and simpler interfaces.

To contact the reporter on this story: Selina Wang in New York at swang533@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Molly Schuetz