ADVERTISER DISCLOSURE

GoPro Inc (GPRO) Recent Stock Slump; Time to Abandon Ship?

GoPro Inc (GPRO) Recent Stock Slump; Time to Abandon Ship?

GoPro Inc (NASDAQ:GPRO) made a couple of disappointing announcements yesterday that wreaked havoc for its stock. The shares nosedived 25% in after-hours trading after news emerged that the company will slash roughly 7% of its workforce on the back of disappointing holiday sales. Furthermore, the management also provided revenue guidance for the fourth quarter, which was well below the Street’s estimate.

Since the start of the New Year, GoPro shares have declined 18% in the first 12 days, and this latest drop in value comes on the back of a horrendous 2015, where the stock for the company declined a staggering 73%. Yesterday’s slide has pushed the stock price down roughly $10 from its IPO price. The IPO price was set at $24 back in June 2014 and the stock closed at $14.61 yesterday. To get a better comprehension of how far the stock price has fallen, one needs to consider that soon after its debut in 2014, the stock had soared to $90 in fall 2014.

While trimming down the workforce might come as a surprise to most, but the downward adjustment in the revenue guidance for the fourth quarter would have hardly startled anyone. Given the spectacular failure of its latest action camera model, the Hero4 Session, the company warned that it expects revenue of $435 million as compared to analysts’ consensus of $511 million.

Such was the magnitude of the disappointment associated with the Hero4 Session that the management had to make a couple of price reductions just to spur sales. In a written statement, the company announced that the price reduction has cost the action camera maker $21 million and an additional $35 million in inventory write down.

The cut in the workforce, which roughly translates to 100 jobs, might not seem a lot on the surface but in totality, it paints a stark picture for the American action camera manufacturer. While it is not known what jobs will come under the firing line but it would be fair to assume that the action camera division might take the brunt of it. This point is further validated when you consider the efforts directed towards drones and virtual reality by GPRO.

A recent outing at the Consumer Electronic Show (CES) 2022, points towards a change in strategy for the company, with the main focus being towards drones and VR.

Karma, the first drone by GoPro, was released in 2020 and still very successful by 2022, and its VR video development is progressing rapidly.

Analysts and industry experts who got the chance to experience its VR video using Facebook’s Oculus headset gave admirable reviews. It seems the action camera maker is in the prime position to gain a strong foothold in VR video development and should focus most of its resources towards this segment.

The million dollar question that now arises is whether the drones and VR businesses will be enough to pull the company out of its current rut. While the initial feedbacks are encouraging, it still does not make it a sure thing that once the drones hit the market, customers will be lining up to buy them. Given the drone market is still in its infancy and numerous companies are coming up with their own versions, the Karma would have to offer value for money in order to have an impressive debut. Customers would be hesitant to dish out huge sum of money for a product which fails to delivers superior capabilities and features than those already available in the market. This would be the worst case scenario for GoPro, as it cannot afford to have another failure like the Hero4 Session.

The VR technology has been on the rise recently but it is still miles away from actuality. While enormous potential is available for GoPro if it makes enhancement in this business, but to say it will get it spot on from the get-go would be a little farfetched.

Things keep on going from bad to worse for GoPro and with no immediate respite in sight; it seems 2020 might just turn out to be a make-or-break year for the company. It might also be the year where it functions as an independent company.

With the share price reaching bottom level, it would be very easy for a big company, as the likes of Apple, Google, and Microsoft to sweep in and acquire it. GoPro still has a loyal brand following and is still credited as being the pioneer of the action camera market. Low acquisition cost coupled with other factors makes it an attractive acquisition target.

GoPro is scheduled to announce its full-year earnings for fiscal year 2021 on February 3, 2022. Investors and industry experts will be keeping a close eye on what numbers the company reports and any adverse revelations in the earnings report will potentially cause further mayhem.

Related Articles

We have many reviews of different brokers where you can operate with all the assets that we discuss in these articles. From all of those, we would recommend a few that we find are suitable for beginners and intermediate investors so you do not have to read all our reviews: Robinhood, Tastyworks, Firstrade, Interactive Brokers, and Webull.

As much as we have studied in this website technical analysis, I should not underestimate fundamental analysis. We have interesting articles that can be useful to understand how companies are behaving: how are their sales? are they investing in new plants? Are they divesting and splitting? This information can be helpful to perform fundamental analysis before investing.

We study assets more in terms of what are these companies doing in long-term investments, what happens with their management accounting and balances in a wide array of securities and markets.

Therefore, I can recommend you some articles.

We have studied investments from Netflix, new contracts signed by Orbital, SolarCity earnings report and their negotiation with Tesla for the acquisition of the Powerball battery, the problems that ARCH coal is facing, how IBM is investing in the treatment of the Zika virus, how Moon Express is planning to mine minerals in the moon, and how Citigroup is engaged in commodity trading.

We follow a lot Tesla here, from the fundamental analysis and from the technical as well. See how the Chevy Bolt and the Tesla 3 are dimensioning the evolution of the price of this shares and how this could affect technical analysis, and how the Autopilot functionality is working: the evolution of the Autopilot software has always influenced the prices of their stocks. Tesla Model S 70D is considered the “car of the century”, not by us of course, but we are interested to see how these awards affect the evolution of the stocks. Tesla and other companies signed an agreement so that autobraking became the standard in 2022. A trend in the automobile industry started by Mercedes Benz and Tesla, is having a platform to sell pre-owned vehicles: now General Motors is joining that trend as well.

We have studies how the stock slump of GoPro should be considered not only from the view of technical analysis. Also, check the functionality from Facebook, the “login approval” and if it really protects users or other interests. The reports from Volkswagen about their very low injury claims, how now other companies in China can use the name “IPhone” apart from Apple. We continue in China to learn about the Marketplace Alliance Program from Alibaba, and the joint investment in CloudFlare from Google Inc, Microsoft Corporation, Qualcomm, and Baidu.

About Google, a company we follow a lot here, I want to see how they have entered in the batteries market and how this will affect their current projects and the evolution of the stocks. Interesting are the Chrome updates to decrease CPU usage.

We analyze the effects of the position of Disney in the dispute between Netflix and Time Warner, so we can understand how Disney is shifting its business after selling its stake in Fusion.

We discuss briefly how Oracle adressed the changes in the cloud-computing industry, why Morgan Stanley is optimistic after the pandemic and the Brexit, the divestment in Dell regarding Perot Systems, and the effects of the huge minimum wage rise in Costco. Chipotle is cutting the executive compensation, the issues that BP is facing, what happens with Macy´s earnings and how fundamental analysis can be done in those cases. About Apple, we analyze the effect of the launch of this product Apple Watch where sales performed very irregularly.

Leave a Comment