Dow Jones soars above 23,000. Is it too stretched? >>> READ MORE

Layoffs or Not, GoPro Inc (GPRO) Stock Is Losing an Uphill Battle

You can't play offense and defense at the same time. GPRO stock is learning that the hard way.


Source: Shutterstock

    View All  

Whether it’s good news or bad news is a matter of perspective. If you’re an investor in action camera maker GoPro Inc (NASDAQ:GPRO), Wednesday’s announcement that the company was cutting expenses is a positive in that it boosts the arguable value of GPRO stock.

If you’re one of the 270 people that’s about to lose your job because you’re part of the expenses about to be culled, the news isn’t so fun.

Still, even though news of the GoPro layoffs has catapulted GPRO stock higher to the tune of 11% this week, current and would-be shareholders have to innately know the constant retractions and scripted optimism all have to point somewhere:

I believe that somewhere is an inevitable collapse of the company.

Shrinking Its Way to Success

The bad news came packaged with good news. In a press release posted Wednesday, GoPro confirmed it would be generating between $190 million and $210 million in revenue for the quarter ending this month. Analysts were forecasting an average top line of $200.6 million. Better still, GoPro reported it anticipated posting a full-year GAAP profit.

It’s how it intends to drive that profit that’s proving unpopular with some.

GPRO intends to cut 270 positions, or roughly 17% of its workforce of 1,552 as of the end of last year. That should reduce GoPro’s annual GAAP operating expenses by $585 million, cateress paribus, setting the stage for the swing to GAAP profitability.

GoPro further believes it will achieve that profitability even before the fourth quarter, when the wave of holiday shopping creates a surge in sales. The news leads to an obvious follow-up question:

What’s the adverse impact of cutting loose of 270 workers, who were obviously doing something for the company?

GPRO stock chart

Chief Operating Officer Charles Prober answered the question in a conference call hosted after the announcement was made, saying “We are confident that we are not making those trade-offs. By being more focused we feel we are improving our efficiency and doing fewer things, better.”

As veteran traders can attest — even just veteran traders of GPRO stock — just because something thinks it and says it doesn’t necessarily make it true.

Reality Check

Let’s call a spade a spade. GoPro is fighting an uphill battle, and losing it.

Next Page

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC