GoPro Inc (NASDAQ:GPRO) stock has been on my list of picks to avoid for some time, and the list of bullet points outlining why just continues to grow as the stock continues to sink. Since the start of the year, shares of GPRO stock have lost over 30% of their value.
Although it did experience a spike yesterday (potentially due to the rising popularity of Pokemon Go), the reasons to remain bearish toward GPRO are numerous.
Just a couple of months ago, I explained a few reasons why investors should be cautious about GoPro stock: The company delayed its crucial Karma drone release, weak demand for existing cameras was expected and there was (and still is) a lack of earnings on the horizon.
Now, another big-time item can be added to this list: the fact that a GPRO competitor has filed for bankruptcy. ION Worldwide is a maker of wearable digital recorders, and while they’re largely home-security products and dash cams, the company is still considered a key competitor to GoPro.
With a quick glance, such news could seem to go one of two ways: It could signal doomsday for GPRO’s market overall, or it might suggest that GoPro will have the opportunity to own even more of the market with a key competitor out of the picture.
The Bigger Picture for GoPro Stock
Unfortunately for GoPro stock fans, ION is filing bankruptcy but not going out of business (hence, not actually out of the picture) — thus we get the doomsday signal without any possible relief. In fact, while ION’s cameras currently aren’t quite “apples-to-apples” with GPRO’s (as InvestorPlace’s Dan Burrows recently pointed out), they’re about to be.
As The Wall Street Journal reported, “ION expects to keep its business going and said in court papers that it will launch a new 4K camera by the end of the summer, which the company says will be priced to compete with GoPro.”
On top of that, the bankruptcy filing really is a one-two punch for GPRO. On the one hand, ION’s revenue has been declining dramatically, being cut in half from 2014 to 2015, indeed suggesting there’s not much growth at all left in the industry.
On the other hand, ION’s woes were compounded by the fact that it filed an intellectual-property lawsuit with GoPro — one that has racked up high legal costs.
Combine these two issues and it adds up to a not-so-pretty picture for GPRO stock.
Bottom Line on GPRO
And even if you don’t think they’re the kiss of death, remember that this is a stock that has been flirting with doomsday for some time. Zooming out, just the fact that smartphone technology continues to improve suggests the ubiquitous devices could replace the niche GoPro carved out.
And even if GoPro manages to hold onto its niche, the stock was priced for growth, growth, growth, as all supposed game changers are. But the company can’t seem to keep up and ION’s bankruptcy suggests it’s in part because the market’s growth simply isn’t there.
So, as I’ve said before, bottom-fishers should look elsewhere. GoPro stock simply doesn’t have the momentum or market to deliver the kinds of returns you should be hooking.
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.
