Why GoPro Inc (GPRO) Stock Can Still Fight Harder Than You Think

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There is a saying on Wall Street that even a dead cat will bounce if you drop it from high enough. That’s the kind of gallows humor following GoPro Inc (NASDAQ:GPRO) as it tries to return to growth and earn its first profit since 2015.

Why GoPro Inc (GPRO) Stock Can Still Fight Harder Than You Think

Source: GoPro

The company preannounced its March earnings nearly a month ago, saying it expects to deliver about $210 million in sales for the quarter and show a non-GAAP profit by the end of the year. The company also announced another 270 layoffs.

The layoffs stemmed GPRO stock’s bleeding. The shares rose about $1 per share overnight after the announcement and held the gain, opening for trade April 10 at $8.62 each. That’s important, because it’s at a market cap of $1.2 billion, and many analysts won’t even follow a company that falls below $1 billion in value.

GoPro followed its stock stabilization with another capital raise, a five-year note worth $175 million priced at 3.5%. The notes are being sold this week in a private placement.

What’s New at GoPro?

GPRO is also delivering some new products to go along with the cuts.

The most important may be a $100 cable called the Karma Grip, a camera stabilizer whose motorized grip can be separated from its handle and used on the company’s Karma drone. The stabilizer gets rid of the jerkiness you get with sports camera video.

There’s also a new extension pole called El Grande with a ball-and-socket base that lets the user swivel the camera as well as hold it some feet away. Continuing to improve and enhance the product is essential, especially when trying to push into new professional markets like journalism. 

It should also be noted that GoPro is still in the process of scaling the production and distribution of the Karma drone. It entered three major European markets this month, where it competes with Chinese-made DJI products.

The Battlefield for GPRO Stock

None of this — neither the financial moves nor the product moves — impresses InvestorPlace contributor Lawrence Meyers, who calls GPRO stock a “fad” stock, like Crocs. 

Meyers is not alone. Dougherty & Co. has renewed its “sell” rating on GoPro stock, with a $5 price target. The average rating on the stock is underweight, with six saying sell and only one saying to buy GPRO stock. Earnings estimates are also all over the map, with some analysts thinking the company can make as much as $25 million, 24 cents per share, this year and others expecting a loss of 81 cents per share.

However, there are some who consider GoPro stock a “screaming” buy.  One compared it to Advanced Micro Devices, Inc. (NASDAQ:AMD) at $2 per share — that stock is now trading over $13.

The argument is that GoPro is narrowing its focus on cameras, the drone, and video editing apps, that the new products are very good, and that its software costs will be reduced by concentrating that work in Romania. There are also predictions that this market, created by GPRO, may be $10 billion in four years, up from $3 billion currently, so growth will come even if its market share just remains stable.

GPRO and the Chinese Threat

There is an unspoken threat in the bearish forecasts. China. GoPro had nearly half the sports camera market in 2015, but DJI absolutely dominates the drone market, where most such cameras are mounted, and its chief rivals are all Chinese.

What GPRO needs, more than anything else, is action on trade and on the Chinese currency that will allow it to find a niche for Karma and prove its high-end sports camera line can compete on a level playing field.

That is speculative, which is why GoPro remains a speculator’s stock. Buy it if you believe in it, but otherwise stay several selfie sticks away.

Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2017/04/gopro-inc-gpro-stock-fight-harder/.

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