GoPro predicts profit, thanks to massive layoffs – MarketWatch

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GoPro Inc. Chief Executive Nick Woodman sounded very bullish Wednesday in forecasting a return to profitability in 2019 for the action-camera maker.

“GoPro’s brand has never been stronger, our products never better,” Woodman told analysts. “And we are fired up for the year ahead.”

GoPro announced earnings slightly above Wall Street’s expectations Wednesday afternoon, breaking a long streak of messing up the holiday quarter. Woodman said that the company plans to “capitalize on this momentum, expanding growth and profitability with a commitment to keeping operating expenses at or below $400 million.”

But don’t get overexcited about GoPro’s

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  future. Woodman’s last comment about its goal to keeping its operating expenses at or below $400 million is key, because it shows how he has accomplished this: Massive layoffs. At the end of 2016, GoPro had 1,552 employees. At the end of 2017: 1,273 employees. Woodman said Wednesday that the company currently employs 841 workers.

Wall Street’s reaction to the positive comments was a bit muted and its shares even fell briefly during the conference call, only to bounce back a bit and end the extended trading session with a 2.1% gain. The stock is on a roll so far this year, up 21.5% since January, when Woodman told MarketWatch that there was no boogeyman in the fourth quarter.

GoPro is still a niche electronics company, but at least Woodman now realizes GoPro is at its best by focusing on its core users and offering them services, like low-cost cloud storage of their photos, rather than trying to greatly expand the reach of their products, which have a core audience of extreme-sports enthusiasts.

The company said that it expects 2019 revenue to grow at a rate of about 5% to 8%, slightly higher than Wall Street was expecting, and a break with recent past declines. According to FactSet, consensus for 2019 revenue is growth of about 4% to $1.2 billion. That compares with three years of declining or flat revenue: a drop of 2.7% in 2018, down 0.5% in 2017 and a drop of 26.8% in 2016.

Executives expect revenue to grow because of a strong reception to its higher-end Hero7 Black action camera, as well as the new avenues to recurring revenue.

“We expect our mix of cameras to continue to shift to the high end, and as a result we expect ASPs to increase and we expect to grow our GoPro Plus subscription service to our enhanced offering and expanded marketing efforts,” Chief Financial Officer Brian McGee said in the call. “We expect revenue to grow each quarter on a year-over-year basis.”

GoPro seems to have accepted its fate as a smaller, niche-market player in consumer electronics, a brutally difficult business, especially for hardware companies. The company appears to be looking, like Apple Inc.

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, to services such as cloud storage for growth — GoPro Plus has over 200,000 subscribers, and more features being added.

But GoPro is now a slow-growth company that is winning through cutbacks and expense controls. If its single-digit revenue growth does not pan out as it hopes, it has few levers left to pull. In this cutthroat industry, where GoPro’s rivals include smartphone cameras, investors can never get too hopeful or complacent about turnarounds, as a niche business can become quickly obsolete.

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