It’s long been clear that GoPro Inc (GPRO) was doomed as a standalone company and that GPRO stock was a goner.
But, boy, did it happen fast.
GoPro’s sales are a disaster, its guidance is terrible and it’s showing 7% of its workforce the door. The resulting plummet in GPRO stock makes flying a wingsuit head-first into a mountain look pretty good by comparison.
GPRO is a perfect example of hype trumping reason. Yes, it enjoyed red-hot growth back when it went public in 2014, but that could never last. Its target market is too small, and now it’s flooded with cheaper competition.
As we’ve said many times before, at its core, GPRO is a company that makes cameras. True, they’re digital cameras — not the kind dating back to the 1880s — but even that technology is decades old.
There is absolutely no competitive moat here. Anyone can come up with a competitor, and plenty of companies did. So now tiny GoPro finds itself losing market share to behemoths like Sony (SNE), Panasonic (PCRFY) and JVC (JVCZF) and upstarts, alike.
Some bulls have stupidly compared GoPro cameras to Apple’s (AAPL) iPhone. The argument goes something like this: Apple didn’t invent anything new, either — it simply put existing technology into a superior package.
It’s a false comparison.
Everyone has a mobile phone. The market is enormous. GoPro’s audience is limited to surfers, skateboarders, Base jumpers and their ilk. That’s small market to begin with and was clearly easy to saturate in short order.
No Hope for GPRO Stock
And so predictably, the growth story came to a crashing halt. Just look at the valuation. Growth stocks don’t trade at less than 16 times forward earnings as GPRO does. That’s cheaper than the broader market, which no one mistakes for a fountain of growth.
Meanwhile, analysts are tripping over one another to downgrade GPRO stock and slash their estimates. Wall Street now expects GoPro earnings per share to fall almost 90% in the most recent quarter. That’s a result of a 30% decline in sales even though it was the holiday selling season.
After that, analysts are actually looking for a net loss to kick of the current fiscal year on another steep drop in revenue.
GoPro stock is now down 86% from its all-time high, and the only question left is: What took it so long?
Bulls argue that shares are a bargain thanks to upcoming innovations like the launch of commercial GoPro drones.
Right. That will turn things around. Because no one else can make a cheaper drone that’s just as good for a market that cares about costs first and foremost.
In another innovation, GPRO thinks it can become a media company that licenses content shot on its cameras. Um, yeah … that’s a road to riches. Digital media is incredibly hard to monetize and the profit margins are terrible — and that’s true even if anyone actually wants your stupid content in the first place.
At this point, the only reason to own GoPro stock is because it’s an acquisition target. Of course, that’s hardly going to produce the kind of amazing upside the company was touting with its IPO.
One way or another, the GPRO story is going to fade to black in the not too distant future.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
