It's hard to complain about many of the recent moves GoPro Inc. (GPRO) - Get Report has made to stabilize sales and narrow its losses. But as the company gets set to deliver its Q2 earnings report on Thursday afternoon, it looks as if the end result of all this maneuvering could simply be to let GoPro carve out a niche as a provider of hardware for action sports, outdoors and drone enthusiasts, rather than a mass-market consumer electronics firm.

The good news: After falling 27% in 2016 to $1.19 billion, GoPro's sales have been rebounding a bit. Sales rose 19% annually in Q1 thanks to the late-2016 launch of GoPro's Hero5 camera line and foldable Karma drone, and Q2 sales guidance of $260 million to $280 million implies 22% growth at the midpoint.

On average, analysts polled by FactSet expect Q2 revenue of $269 million and EPS of negative $0.25. For the whole of 2017, they currently forecast revenue of $1.34 billion (up 19% from 2016, albeit still below 2014 and 2015 levels) and EPS of negative $0.12 (better than 2016's negative $1.44).

Aiding the EPS improvement: After years of aggressive spending growth driven by fantasies of becoming a consumer hardware and content giant, GoPro has gotten serious about cutting costs. Adjusted (non-GAAP) operating expenses fell 17% annually in Q1 to $131 million, and the company expects them to be "below $495 million" in 2017, after totaling $708.8 million last year.

Here's What Intel CEO Brian Krzanich Thinks About the Powerful Tech Stock Rally

GoPro has also done a decent job of narrowing its product line: The company now sells just four consumer devices -- the Hero5 Black, Hero5 Session and Hero Session cameras, and the Karma -- along with related accessories and mounts. This serves to lower R&D costs and simplify marketing, and might also help keep inventories in check.

But revenue growth appears set to slow in the back half of the year, in spite of GoPro's plans to launch a Hero6 camera towards the holiday season. Though the company's sales are set to rise over 20% during the first half of 2017, analysts on average forecast full-year sales will grow just 11% to $1.32 billion. Tempered expectations for the Karma are a factor: Though GoPro expects Karma to grow as a percentage of revenue in Q2, it's forecast to decline as a percentage of sales in the second half of 2017.

Moreover, a good argument can be made that GoPro still needs to be more aggressive with its cost-cutting. In 2014, when the company posted adjusted EPS of $1.32, it had adjusted operating expenses of just $369.4 million on revenue of $1.39 billion. This year, analysts expect sales to be slightly lower, yet GoPro is effectively guiding for expenses to be over 30% higher.

The margin pressure that GoPro is seeing also makes it unlikely that earnings will return to 2014 levels anytime soon. Whereas GoPro had an adjusted gross margin of 45.1% in 2014, its adjusted GM was just 32.3% (down 70 basis points annually) in Q1, and is forecast to be in a range of 32.5% to 34.5% in Q2. Though margins should rise in the second half due to seasonal volume growth, the price cuts the company has made to prop up camera sales remain a major headwind, more than offsetting the margin benefit the Karma is providing.

GoPro shares surged 16% to $9.34 in after-hours trading on Thursday.

Updated from July 10 with additional information.

More of What's Trending on TheStreet:

GoPro, aided by a strong brand and a core base of action sports enthusiasts, has done a decent job of fending off direct action camera rivals such as Samsung, Polaroid and Garmin Ltd. (GRMN) - Get Report , as quarterly NPD sales data indicates. The investments the company has made to create reliable cameras able to record high-quality, blur-free, wide-angle videos, as well as in developing decent apps for controlling a camera and editing footage, have helped keep direct rivals at bay.

But the ubiquitous smartphone camera has done much to constrain GoPro's addressable market, even if fears that the company's hard-core fans would stop using GoPros in favor of smartphones attached to mounts hasn't panned out. While those looking to record footage while doing things like skydiving, skiing or mountain biking are still often inclined to use a GoPro, consumers are generally content to use smartphones in situations where a phone is at less risk of getting seriously damaged.

This raises another problem for GoPro: Many potential buyers only engage in the kind of activities where they'd like to use a GoPro a handful of times each year. That both hurts first-time sales and lowers upgrade rates. If someone only needs a GoPro for a couple of annual ski trips and a summer mountain biking excursion, he or she is probably less motivated to upgrade to a new model with better image quality than to, say, upgrade a smartphone being used for several hours each day.

Apple Hasn't Sent Fitbit Into the Grave Just Yet, Mostly Due to 3 Reasons

GoPro's drone sales, meanwhile, are curtailed both by a limited addressable market and stiff competition. After accounting for the cost of the GoPro camera needed for the device to record footage, the Karma costs over $1,000. And while consumer drones are undoubtedly producing some spectacular footage, many consumers remain hesitant to buy one, no doubt due to the challenges involved in operating a drone in populated areas and/or the limited number of times a consumer can use one to record new footage. Research firm Gartner estimates global drone shipments will be a modest three million in 2017.

And within the consumer segment of this market, China's DJI remains a dominant player. The company's Phantom drone line continues to get high marks for image quality and ease-of-use, and (via the older Phantom 3 family) hits price points much lower than the Karma's. And for now, both DJI's Phantom 4 drones and foldable Mavic Pro drone are seen as having an edge on the Karma in terms of autonomous navigation support.

With GoPro shares trading a little more than a dollar above a 52-week low of $7.14, and valued at about 0.8 times its expected 2017 sales after factoring in net cash, many of the company's top-line and bottom-line headwinds feel priced in. But given these headwinds, investors shouldn't make the mistake of assuming shares are dirt-cheap simply because they trade at a fraction of the levels they were at a few years ago.

GoPro's shares were up 2% to $8.19 on Thursday morning.

Watch More with TheStreet: