3 Companies That Will Be Bankrupt In 10 Years (Sprint, GPRO, FIT)

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Warren Buffett once famously advised investors to only make investments that they’d be comfortable holding if the market were closed for 10 years. Sprint (S), GoPro (GPRO) and Fitbit (FIT) are all companies that could easily fall by the wayside by 2025.

Sprint (S)

sprint stock nyse:sSprint generated -$3.55 billion in free cash flow in 2015. Yet again, there was no buyout offer in sight.

Sprint may be in the unfortunate position of being too small to compete with AT&T (T), Verizon (VZ) and T-Mobile (TMUS) and too big to be acquired without raising antitrust concerns.

With the U.S. wireless market approaching its saturation point, subscriber growth among the telecoms is approaching a zero-sum game, and Sprint is the runt of the litter.

Sprint’s market cap is $14.3 billion, and it already has $30.4 billion in debt on its books to go along with only $2.2 billion in cash. The company has fought hard to hang on as an underdog in the fiercely competitive environment, and it may continue to do so in the near future. However, by 2026, it’s hard to imagine Sprint will still be around unless it can make some major unexpected changes.

GoPro (GPRO)

Market leaders like Netflix (NFLX) and Amazon.com (AMZN) have been forgiven for weak earnings because they have been growing their revenue at such a strong pace in recent years. GPRO, on the other hand, is headed in the other direction.

GPRO’s revenue fell 31% year-over-year in Q4 and another 49% in Q1. The GPRO bull case at this point centers on the role that the company could potentially play in a burgeoning drone market. However, the longer GPRO takes to establish its position in the market, the more competition will be waiting for it.

GoPro recently delayed the launch of its Karma drone, a move that concerns Bluefin Research Partners analyst John Donovan.

“While the company does have a fairly loyal installed base, it will be more that 2 years for a product refresh in an unproven market environment, while a slate of lower-cost suppliers are beginning to saturate the market,” Donovan wrote earlier this month.

Establishing a market-leading position in the drone market could be the only hope for GPRO, and it’s already facing an uphill battle against lower-priced competitors.

Fitbit (FIT)

So far, FIT has held its own against the competition, and the company even delivered beats on both revenue and earnings in Q1. Unfortunately, the recurring theme among these three companies is competition. FIT devices have become trendy gadgets among fitness enthusiasts, but FIT likely doesn’t have the resources to compete with Apple (AAPL), Nike (NKE) and other names in the wearable device market in coming years.

Global Equities Research analyst Trip Chowdhry didn’t pull any punches when describing FIT’s outlook after earnings.

“The market for single purpose devices, like Fitbit, will disappear in a couple of years,” he said. Back in December, Chowdhry went a step further and called FIT “total junk.”

Chowdry believes that fair value for FIT’s stock is around 1x sales, implying that FIT has another 33% downside ahead.

If FIT can’t find some way to distinguish its devices or services from those offered by larger competitors, the Fitbit is destined to go the way of the Palm, the Blackberry and the Walkman.

Disclosure: As of this writing, Wayne Duggan had no positions in any of the stocks mentioned. 

Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. Mr. Duggan is the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market.


Article printed from InvestorPlace Media, https://investorplace.com/2016/05/stocks-bankrupt-10-years-gpro-fit-sprint/.

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