Signs point to another bad Christmas season for GoPro Inc. (NASDAQ:GPRO), and this could be its last. The action camera company hit it big a few years ago with cameras that could be mounted on bicyclists’ heads, or left outside for weeks at a time to track wildlife. Then the fad faded and GPRO stock followed.
CEO Nicholas Woodman tried the drone market, but Chinese competition has knocked the drone out of the sky, and indications are this Christmas season may be a bad one for the camera as well. The company has slashed the prices of its Hero5 cameras, and these are global cuts. You can get the camera for under $300 in India.
Even if the company hits its “whisper number” of $475 million in sales for Christmas, that will still be over 10% below last year’s $540 million, and that result sent the stock down 25% over a single trading day.
A Filled Niche
GPRO stock may be approaching undervalued territory, as Luke Lango writes, with a market cap of $1.17 billion and expected 2017 revenue of $1.1 billion.
But it is profitable only because of budget cuts. Combined selling and research expenses fell from $242 million in last year’s fourth quarter to $120 million in this year’s third quarter. That let it eke out a small profit of $14.66 million, 10 cents per share, but this is no longer a growth company.
As Josh Enomoto writes, ROKU stock still is sinking because it no longer has first-to-market advantage. The Karma drone is going nowhere against the Mavic line from China’s DJI. The early price cuts on the Hero cameras indicate more trouble ahead, and Chinese competition is also on its way there.
GoPro hoped for continuing relevance with software, but even the company acknowledges problems with its GoPro Studio failing to launch, and its software site is currently focused on offering deals on the hardware.
The company is very excited over some footage of a seagull grabbing the camera in Norway, but even there the seagull dropped it with a parting peck.
Where Is the Hope for ROKU Stock?
There have been two areas of hope.
The Fusion is GoPro’s last roll of the dice, and it’s reasonable that the company might want to maximize profit, and hold the line on price, for as long as it can. But for investors, the lack of information does not inspire confidence.
Another possibility is a buyout. Rumors that Apple Inc. (NASDAQ:AAPL) might buy GoPro have been around for two years, but nothing has happened, and today the most popular name for a buyer is Snap Inc (NASDAQ:SNAP).
All this makes GPRO stock, if anything, a trade, as Lawrence Meyers wrote in November. Since that article came out, the stock has fallen from about $8.50 per share to less than $8.
The Bottom Line
I don’t short stocks, and I hesitate to recommend it. Even when you’re right, someone else may step in to support the buy side and you’re still out of luck. But GoPro may be an exception. There is no white knight here.
It is increasingly likely that GoPro will get nothing but coal in its stocking this Christmas. Borrowing about $125 million last spring meant it still had about $199 million in cash and investments at the end of September. But how much will be left after the Christmas bills are paid?
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.