GoPro Inc (NASDAQ:GPRO) stock fell 4.3% in after-hours trading on Thursday after the company released its fourth-quarter results. From here, it looks like the decline in GPRO stock should have been much, much steeper.

GoPro stock already had fallen 13% on Jan. 8 after the company disclosed preliminary results for the quarter. I wrote at the time that the drop didn’t make GPRO cheap enough. With GPRO threatening to break $5 for the first time, that’s still the case.

After all, this was a key quarter for GoPro. The significant price reductions, plunging gross margins and adjusted EBITDA loss forecast three weeks ago already made it a failure. Yet, even after disclosing those preliminary numbers just three weeks ago, GoPro managed to disappoint again, missing across the board.

Combined with a questionable strategy for 2018, there’s simply little reason to consider GPRO stock, even at these levels. This looks like a broken company and, barring an unlikely acquisition, there’s no reason to see it being fixed any time soon.

GoPro Earnings Miss — Twice

Somewhat incredibly, GoPro’s actual reported earnings missed the figures it had estimated just three weeks earlier — in every conceivable way:

• Revenue: $334.8 million versus “approximately” $340 million.
• Non-GAAP gross margin: 24.8% versus 25-27%.
• Non-GAAP operating expenses: $120.3 million versus $112-$118 million.

The midpoint of the estimated ranges in the preliminary numbers suggested an operating loss of $26.6 million. GoPro lost approximately $10 million more than that — $37.4 million, to be exact.

In other words, Q4 actually was worse — much worse — than previously believed. And the gap between what the preliminary and final numbers showed means either the company simply isn’t on top of its business and/or performance worsened toward the end of the quarter.

Neither explanation is particularly comforting, nor is the company’s outlook for 2018.

Pricing Problems

GoPro CEO Nicholas Woodman tried to put a positive spin on 2017 results — and to steer attention toward 2018. He cited the company’s strong sell-through in the quarter — admittedly, after $100 price cuts on both the HERO5 and the HERO6 cameras. And he detailed a plan to cut operating expenses to under $400 million next year — down from $476 million this year.

But there are big problems on both fronts. Woodman inadvertently highlighted the key problem with GoPro’s business model with a quote in the Q4 release:

The fourth quarter demonstrated there is significant demand for GoPro products at the right price.

The problem is that the “right price” for that demand is not the right price for GoPro. The company lost $26 million even on an EBITDA basis in Q4, which itself backs out some $15 million in GPRO stock options issued to employees. The business model does not work at these prices.

So, what changes? The company pointed out in its Q4 release that it has over 80% market share in the US and 69% on a dollar basis in Europe. That’s not necessarily a good thing. There’s little market share to take — the category itself has to grow. But the category can’t grow without GoPro discounting its products — and losing money in the process. Unless the 360-degree Fusion, which is an interesting product and is being shipped to Best Buy Co Inc (NYSE:BBY), is a massive hit, revenue isn’t really going to move much, if at all.

Cost Cutting

As a result, GoPro is cutting its expenses by at least $80 million next year. All else equal, that would get Adjusted EBITDA to roughly $50 million, which only implies minimal free cash flow for a business still valued at roughly $900 million.

But there’s a broader problem. On the Q4 conference call, GoPro detailed plans to improve its analytics so as to better price its products. It’s going to launch more new products this year, including entry-level offerings. Marketing spend is going up. The company needs to invest in its app and software capabilities.

Yet, the company is cutting operating expenses by 16%. There’s some help from the shutdown of the drone business. But, that aside, GoPro still plans to invest in the business and cut spending at the same time. Either the company has been wasting tens of millions of dollars a year — or that plan isn’t going to work. Here, too, neither explanation is particularly comforting.

GPRO Stock Still Isn’t Cheap Enough

So, really, what’s left? The balance sheet is in decent shape, so GPRO isn’t going bankrupt. But a market capitalization in the $800 million range still values GoPro as though it will become a consistently profitable business. There’s little support for that outcome in the Q4 numbers and related commentary.

The only real trade on GPRO at this point is as a buyout candidate. Rumors of a takeover have been swirling for some time and Woodman has admitted the company would consider a sale. As also seen at Fitbit Inc (NYSE:FIT), it may simply be too difficult for a single-product hardware company to succeed in the modern environment.

But GoPro has no leverage with a potential buyer. And with all the cost-cutting, the potential synergies in such a deal are shrinking. Furthermore, I can’t see why rumored suitors like Apple Inc (NASDAQ:AAPL), Snap Inc (NYSE:SNAP), or Canon Inc (ADR) (NYSE:CAJ) are going to ignore the key pricing and gross margin problems here. Those problems can’t be fixed, or even minimized, simply by changing ownership.

GPRO stock isn’t worthless, and I’m not interested in shorting at these levels, but it seems increasingly likely that this simply isn’t a business that can make much money — for anyone.

Even at $5, it continues to be priced as if it will.

As of this writing, Vince Martin has no positions in any securities mentioned.