Here we go with GoPro (GPRO) stock again. The stock remains in plunge mode after an analyst downgraded GPRO because of what the market already knows: sales stink.
An analyst at RW Baird downgraded GoPro stock to “neutral” from “outperform” (basically bumping it down from “buy” to “hold”) because of sluggish sales growth.
The evidence for top-line weakness just keeps piling up. GoPro slapped a surprise 25% price cut on the HERO4 Session camera at the end of September, confirming the company’s struggle to move inventory of the wearable video camera.
More recently, RW Baird’s William Power notes that Ambarella (AMBA) — one of GPRO’s top suppliers — said current quarter sales were going to come in below expectations.
GoPro also failed to launch a new marquee product for the holiday selling season, which was a worrisome and curious development, to say the least.
Given that GPRO has clearly lost its mojo — and GoPro stock was off 70% YTD before Friday’s selloff — Power felt compelled to downgrade shares. As he said in a report to clients:
“We acknowledge the recent stock weakness and high investor skepticism, but with consensus estimates likely to fall further and no clear near-term catalyst, we are moving to the sidelines.”
The analyst also slashed his price target to in half to $18 per share — which GPRO fell to soon after the market open.
GPRO defenders will say the company can overcome the HERO4 Session flop and failure to introduce a new flagship for the holidays with some hits next year. This is just a stumble for the action-camera maker, not a tumble. Shares are cheap.
Good luck with that.
GPRO Stock: A Loser is a Loser
As we’ve noted again and again and again, it’s only a matter of time before this company flames out.
The key issue with GoPro is that it has no competitive advantage. It makes a wearable, water- and shock-resistant camera. It’s a terrific piece of technology, to be sure, but GPRO has no moat.
GoPro put existing technology together in an innovative way, but it didn’t create anything that can’t be replicated by competition.
It’s a camera, people.
Barron’s says GoPro is the next BlackBerry (BBRY). They’re right.
GoPro isn’t just being assailed by the competition — which pressures prices, and therefore profitability — it’s in danger of being subsumed by existing gadgets.
One-product wonders don’t have a glorious history. Palm once owned the market for digital organizers. Flip disappeared after smartphones began sporting comparable video cameras.
GoPro’s market of snowboarders, BASE jumpers and other adrenaline junkies is hardly inexhaustible, and the company increasingly has to share it with rivals that undercut it on price.
GoPro cameras are widely acknowledged to be the best gadgets in their product category, but best isn’t always enough. Just look at what’s going on with sales.
Maybe GoPro stock is good for a trade. Perhaps you can get really lucky and catch the bottom of a dead-cat bounce.
Longer term? It makes cameras. What more do you need to know?
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
