GoPro, Inc.(GPRO) is set to report third-quarter 2014 results on Oct 30. Last quarter, the company posted a negative surprise of 100.0%. Let us see how things are shaping up for this announcement.
Factors at Play
As witnessed in the second quarter, strong demand for the company’s Hero edition of cameras and accessories are expected to drive profits in the third quarter as well.
Further, the company generates a substantial portion of its revenues from video sales, which is also expected to contribute significantly to top-line growth. Notably, the company reported a 200% year-over-year increase in video views on YouTube in the last quarter.
Although GoPro has a strong business model, limited scope for differentiation and intensifying competition pose major headwinds.
Earnings Whispers?
Our proven model does not conclusively show that GoPro is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESPand a Zacks Rank #1, 2 or at least 3 to beat earnings estimates. However, that is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%.
Zacks Rank:GoPro’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
InvenSense, Inc. (INVN) with an earnings ESP of +10.0% and a Zacks Rank #2 (Buy).
Harman International Industries, Incorporated (HAR) with an earnings ESP of +0.89% and a Zacks Rank #3.
Cirrus Logic Inc. (CRUS) with an earnings ESP of +12.8% and a Zacks Rank #3.
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