For GoPro Inc (NASDAQ:GPRO), it seems that the only thing that is growing anymore is the number of shareholder lawsuits. If anything, senior management is making it pretty easy for short sellers to make money. Unfortunately, it looks like there is not much left for the longs with GPRO stock.
Not long ago the situation was, of course, much different. GPRO could seem to do no wrong. The company was trailblazing a new, cool market for cameras. And yes, it capitalized on this in a big way, pulling off a hot IPO in the summer of 2014. Within a few days of the offering, GPRO stock doubled.
But during the past year, growth has collapsed. There appears to be a breakdown of the operations as well. The result is that GPRO stock has been in a free-fall, down about 90% from its peak.
Just take a look at the latest quarter. Revenues plunged 40% to $240.6 million — the fourth straight quarterly decline — and the net loss came to $104 million, or 74 cents on GoPro stock, down from a profit of $18.8 million or 13 cents a share in the same period a year ago.
Oh, and the company believes that the red ink will continue throughout 2017. This is despite a plan to slash costs by about $130 million.
Then again, GPRO stock appears to be sunk in operational issues. In fact, it’s as if management has lost control. For example, there was a snafu regarding negotiations with Amazon.com, Inc. (NASDAQ:AMZN), which resulted in delay of the sales of new cameras. Then there were production problems — which further delayed shipments.
Yet such things have paled in comparison to the recent recall of 2,500 Karma drones. Apparently, they were falling out of the sky like kamikazes!
Keep in mind that this product was a key part of the comeback strategy — and was also supposed to be a driver for the all-important holiday season. For now, there is no clarity on the status of the Karma drone
But already, the company has been taking down its guidance — which has continued to weigh on GRPO stock. The full-year forecast now calls for revenues of $1.25 billion to $1.3 billion, down from the previous estimate of $1.35 billion to $1.5 billion.
So in light of all this, Wall Street has been throwing in the towel. Here’s a look at some of the recent calls:
- Piper Jaffray has a $9 price target on the stock and the rating is “underweight.”
- Bank of America has a “underperform” rating on GRPO stock and a price target of $9.
- Wedbush downgraded the rating from “outperform” to “neutral” and dropped the price target from $12 to $9
- Dougherty & Company took down its rating from “neutral” to “sell” and slapped a brutal $6 price target GoPro stock.
In the meantime, GPRO must deal with the onslaught of competition. Just some of the rivals include Canon Inc (ADR) (NYSE:CAJ), Nikon Corp (ADR) (OTCMKTS:NINOY), Samsung Electronic (OTCMKTS:SSNLF) and Sony Corp (ADR) (NYSE:SNE). Then there is buzz that others may enter the market, such as Apple Inc. (NASDAQ:AAPL) or even Under Armour Inc (NYSE:UA).
Even worse, GRPO’s core product is likely more of a niche, not a mass market, opportunity. As I’ve noted on InvestorPlace.com: “Let’s face it, how many people really need a camera attached to their surfboard or helmet? And besides, for those who do, is there really a need for frequent upgrades?”
Yet for the most part, the credibility of GPRO’s management is in tatters. Can we believe much of anything that is announced? Will there be interesting products — that work? So far, there has been little to bolster confidence.
In other words, when it comes to GPRO stock, it seems pretty safe to just assume the worst.
Tom Taulli runs the InvestorPlace blog IPO Playbook and also has his own tax preparation firm. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
