GoPro Inc (NASDAQ:GPRO), the brand behind extreme sports cameras, has made big bucks off videos that feature nauseating ups and downs for skateboarders, surfers and cliff-divers.
But watching GPRO stock go on the same gut-wrenching ride as a BMXer doing a faceplant isn’t exactly what investors like to see.
After GoPro reported its fourth-quarter earnings on Thursday, GPRO stock traded up 13%, before immediately coming back to earth by 11% the next day. GoPro beat expectations across the board… but then quickly crashed back to earth.
So why the down slide in GPRO stock? Turns out COO Nina Richardson is resigning, among a few other issues with GoPro’s momentum and share devaluation.
That leaves investors wondering if GoPro stock ever take off again, or whether it is destined to live the topsy-turvy adrenaline rush of its users.
I say it’s the latter, and here’s why:
Momentum? What Momentum?
After GoPro went public last summer, it’s stock price soared from $24 to nearly $70. It seemed like GoPro was destined for greatness… until it skidded out.
GPRO stock had skyrocketed way too fast for Wall Street to handle, quickly reaching high levels of volatility in its price to earnings ratio. GPRO stock is now 50% lower than its peak trading days back in October, with no more momentum in sight.
GPRO stock is currently trading at over 36 times forward estimates of $1.29 for fiscal 2015 according to Standard & Poor’s — not a good sign for a company some consider a fad. What’s more, GoPro now has to fend off competition from Sony Corp (ADR) (NYSE:SNE) with its Action Cam FDR-X1000V which debuted last month at CES.
All this has certainly put downward pressure on GPRO stock and investor sentiment.
More Stock Floods the Market, Devaluing Shares
GPRO can’t get enough of the adrenaline junkie nature of its business, I guess, because last November GoPro decided it was “no whammy” time and issued a secondary offering, basically diluting the value for existing shareholders. The market cried foul and GRPO stock took a 5% loss overnight.
On top of that, investors should be concerned with the looming “lock-up” expiration on Feb. 17, which essentially allows higher ups in GPRO management to unload shares and flood the market. That is sure to drive GPRO stock price lower.
Analysts are Not Loving GPRO
Citigroup recently downgraded the price target of GPRO stock to $48 from $59 due to what Citi believes will be a “slow start” for the camera manufacturer in 2015. The report specifically mentions the resignation of COO Richardson as a “surprise” which could “weigh on the shares.”
The forward guidance of earnings per share given by GPRO was below Citi’s expectations, with GoPro guiding an EPS of 15-17 cents this quarter. Consensus estimates for Citi currently sit at 17.5 cents, while its revenue estimates for GoPro have declined 45% over the last quarter to $346 million.
Other bearish analysts are citing GPRO’s lack of upside in the March quarter and a “too good” Q4 that set expectations too high.
Does that necessarily mean to avoid GPRO stock? Well, that depends. If you’re the type of investor looking for a thrill ride then maybe it’s for you.
But until GoPro can show some stronger earnings and consistency within its management, it might be best to leave this stock on the sidelines for now.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.