Why GoPro is up over 20% today

What happened

Outdoor action camera developer actions Go Pro (NASDAQ: GPRO) climbed over 30% when the market opened today and has since settled in with a 20% gain, as of 1:30 p.m. EST.

Quarterly earnings have matched expectations, but other measures have sparked investor enthusiasm for more possible good news in the future.

So what

GoPro has not had a profitable year since 2015 and continued to experience losses in the first two quarters of 2020. But the company managed to generate $ 3 million in net profit in the last quarter.

Image source: Getty Images.

The profit is due to revenue of $ 281 million, more than double what it said for its second quarter ended June 30, 2020.

Now what

GoPro has focused on growing its subscription base and on a direct-to-consumer sales strategy. The number of subscribers rose to more than 500,000 in the third quarter, a jump of 65% from the period a year earlier and of 35% from just three months ago.

Consumers spent on more of the company’s premium offerings. Cameras with retail prices above $ 300 generated 83% of third-quarter sales. The average selling price to consumers increased 11% to $ 304 from the same period a year earlier.

The company touted its “strong launch of HERO9 Black coupled with our GoPro subscription service” as the driving force behind the results. But part of the successful growth of its subscriptions was due to the HERO9 bundle offer, which allows consumers to purchase the camera, with a subscription included, for $ 350. It is effectively reducing the $ 450 retail price of the HERO9 to attract growth in subscriber numbers.

Investors will have to wait to see if this short-term gain translates into long-term subscriber income. In the meantime, investors are just happy the company was able to report a profitable quarter.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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