GoPro Exiting Chinese Manufacturing Operations, Sort Of

If one issue under the tariffs and trade war with China has been realized by U.S. companies who have manufacturing facilities there, companies have to have started realizing they need to at least have geographic diversification in their manufacturing risk. An announcement was made by GoPro, Inc. (NASDAQ: GPRO) that the wearable sport camera leader now plans to move most of its camera production out of China.
There are a couple catches here in thinking that GoPro is automatically exiting China. One catch is that the move is not immediate as the target is summer of 2019. Another catch is that the relocation pertains to the “US-bound camera production.”

The company did note that its international-bound camera production will remain in China. GoPro also noted that the effort here was to mitigate the potential impact of any new tariffs that may come down the pipe.

GoPro did not name where the production facilities would move to and it did not disclose whether there would be any delays and/or specific charges or higher production costs for this effort. Still, it did briefly hit on those topics.

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Brian McGee, CFO and Executive Vice President of GoPro, said of the move here:

Today’s geopolitical business environment requires agility, and we’re proactively addressing tariff concerns by moving most of our US-bound camera production out of China. We believe this diversified approach to production can benefit our business regardless of tariff implications. It’s important to note that we own our own production equipment while our manufacturing partner provides the facilities, so we expect to make this move at a relatively low cost.

GoPro’s third quarter earnings were deemed not good enough at the time, and the turnaround success call from Oppenheimer with a $9 price target has been rather painful for investors who followed that recommendation.

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It remains to be seen if GoPro’s new lineup of camera coming ahead and what will be sold this holiday season will make up for the lost ground that the revenues have seen. Thomson Reuters has the consensus revenue estimates pegged at $1.14 billion in 2018 and $1.19 billion in 2019. That compares to the following revenues for the prior four years:

• $1.179 billion in 2017
• $1.185 billion in 2016
• $1.619 billion in 2015
• $1.394 billion in 2014

Unfortunately for GoPro, the news did nothing to cause a pop in its shares on Monday. GoPro shares were last seen trading down 1% at $4.92 and trading volume was running about 60% of normal versus other trading days. GoPro shares have a 52-week range of $4.42 to $8.26.

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