GoPro Inc. (NASDAQ:GPRO) has been in a tailspin this year. The action sports camera company has plummeted over 70% in 2015, and GRPO stock is now well below its IPO price of $24.
There’s good reason why GoPro stock has been under pressure. In September, Barron’s warned that GoPro stock was doomed for future declines as a gimmicky company without as much growth as many initial investors had hoped. In October, those fears about GPRO were validated with an ugly earnings report that showed trouble on both the top and bottom line.
And sadly for GoPro stock holders, the bad news has only kept coming in more recent weeks.
GPRO Stock Faces Margin and Sales Pressure
After GoPro slashed prices in September, there were fears about margins that were validated by poor earnings. Despite this, yet again GPRO just announced it’s slashing prices on its new Hero 4 Session camera in hopes of tapping into holiday demand.
That’s not good. But worse is that the move comes after chipmaker Ambarella (NASDAQ:AMBA), a well-known supplier for GoPro, reported weak earnings last week and cautious guidance — hinting that demand at GoPro isn’t improving.
Admittedly, GoPro is still a world leader in wearable cameras used in extreme sports from skydiving to BMX to surfing. But the sad reality is that gadgets like this get hot, then run into a wall as they begin to reach market saturation and increased competition. And as companies like GoPro look to get ahead in a tougher market, price cuts and margin pressure are the way of things.
GoPro founder and CEO Nick Woodman is still optimistic. In a press release, Woodman said, in his typical bro style, “I’m stoked that for just $199, everyone can GoPro this holiday season.”
But GPRO stock holders should see through the spin. GoPro stock hit an all-time low today at close to $17, and the charts show clear downward momentum.
In fact, Robert W. Baird cut its price target on GPRO Friday from $36 to $18 for obvious reasons … and in my opinion, investors would be lucky to see that $18 mark topped any time in the near future.
Even if GoPro does juice short-term demand with its price cuts, the profit pressures are too much to overcome.
One could argue that a lot of negativity has been priced in after the flop of 2015, but the news continues to get worse and investors shouldn’t try to catch a falling knife in GPRO stock here.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
