Once dominating the niche action-camera market that it helped create, GoPro Inc (NASDAQ:GPRO) has a tough hill to climb to earn back Wall Street’s trust. But with GPRO stock down 90% from its all-time high of $86.97, these shares could pay off with some patience.
Unless you think GoPro is going to zero, which I don’t, investors with some risk tolerance should give GPRO a long look.
The embattled electronics company, which announced plans to cut some 270 jobs, is reducing costs to improve profitability.
Meanwhile, fresh off its better-than-expected first-quarter earnings results, last week CEO Nick Woodman told CNBC that the company is on track to meet second-quarter revenue guidance: “We feel good about the second quarter, and we think that things are tracking just as we shared on our earnings call, and we’re really happy with the turnaround that we’re seeing in our business.”
Time to Bet on GPRO Stock?
GPRO stock closed Friday at $8.40, down 0.83%. The shares have declined 4% year-to-date, and 11.3% over the past three months, trailing the 7% YTD rise in the S&P 500 index. But with GoPro now trading at 52-week lows, these shares look attractive from a risk versus reward perspective.
And not only is GPRO seeing stronger demands for the Hero 5 line of cameras, Woodman pointed out that the increased demand is coming from both existing and new customers, both in North America and overseas.
And his confidence is supported by industry trends. Earlier this month, research firm Global Market Insights noted that the global action camera market could grow at a compound annual growth rate of more than 22% between 2016 and 2023. This means GoPro has at least six more years of growth left. And with a report from Technavio calling for the action camera market to rise into a $5.81 billion a year industry in the next four years, patience continues to be the right play with GPRO.
Based on first-quarter results, it would seem that both the company’s business and product demand are on firmer footing. Not to mention, GoPro, which still has a dominant retail presence, expects to be profitable this year. What’s more, the company, which introduced its Fusion camera last month, still has a shot to capitalize on its 360-degree video technology and move more heavily into the fast-growing world of virtual reality VR.
Featuring six GoPro cameras fused into one, GoPro’s 360-degree camera capabilities could turn it into an acquisition target for Facebook Inc (NASDAQ:FB) or Microsoft Corporation (NASDAQ:MSFT). The latter, in particular, has already had success with consumer products, such as the Xbox. And Microsoft should be able to leverage GoPro’s cameras and software tools to enhance its AR and VR ambitions with HoloLens. Meanwhile, GoPro’s drones and camera’s would be ideal for Facebook’s live video ambitions and 360 degree technology.
Bottom Line for GoPro
Regaining Wall Street’s trust is not going to happen overnight, but by virtue of its first-quarter earnings beat, the company took an important first step. Plus, with the CEO out in front selling the growth of GoPro’s products and business improvements, GPRO stock should at least have established a floor.
And the fact that GPRO stock is down 90% from its all-time high, despite boasting one of the best consumer brand names in electronics, means the company may also be too cheap for an acquirer to ignore.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
