Any investors who tried to bottom fish GoPro Inc (GPRO) in recent months have been met with nothing but disappointment. In the last month alone, shares have lost more than a quarter of their value, bringing the total loss over the last year to around 80%.
Experts have pointed out in various ways that GPRO has been at a “make or break” point. And, unfortunately, every piece of news we get from the company seems to point to the latter.
In early April, for instance, I noted that much was riding on the debut of GoPro’s drone camera Karma, which I labeled a “make or break product.”
At that time, the device was set to launch sometime in the summer, and I expressed frustration at the lack of a clear ramp and launch date for such an important device.
About a month later, when GPRO was set to report first-quarter earnings, CNBC expressed a similarly urgent sentiment, writing, “It’s make-or-break for GoPro.”
Unfortunately, the earnings report didn’t deliver on either front.
The Future of GPRO Is Bleak
GPRO delayed the launch of Karma and made a half-hearted attempt to spin that into a good thing in the earnings release, saying: “And while we had to make the difficult decision to delay our drone, Karma, the upside is that Karma’s launch should now benefit from the holidays.”
There is no explanation for the delay, but considering Wall Street’s nerves were already frayed and that the delay came in not-so-great context (revenue cut in half year-over-year, a wider-than-expected loss and more), “break” seems to be the takeaway.
The drone space is a crowded one and the delay will mean a delayed ramp-up in sales and more time for competitors to steal shopper’s cash.
With no savior on the horizon, the only thing left to “make” GoPro stock at this point would be extreme improvement in existing camera sales, and that’s unlikely. Pacific Crest just warned of weak demand for GPRO products when cutting its consensus on the company’s supplier Ambarella Inc (AMBA) thanks to “weaker GoPro demand and persistent high inventory.”
GPRO faced significant charges in Q1 thanks to excess purchase commitments and inventory write-downs, and investors should expect that continue.
If things couldn’t get worse, competition is heating up outside of drones, too. LG Display Co Ltd. (ADR) (LPL) just introduced an action camera competitor, for instance, and it doesn’t require a smartphone to stream live video.
Meanwhile, complaints about the complexity of GoPro’s software could prompt more customers to use their smartphones and new accessories instead of getting a brand-new device.
The only remotely substantial upside for GoPro stock at this stage in the game is an acquisition — but that’s only a consideration because the stock has been depressed so dramatically.
Without any tangible proof that a buyout is on the horizon, though, there’s little reason to take a flyer on GPRO. The company doesn’t just lack a meaningful catalyst for a turnaround, but it delayed the most immediate one.
That lack of urgency, especially when combined with questionable management, questionable fundamentals and a whole lot of competition, should be more than enough to make you stay away.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
