Is GoPro Out of Troubled Waters?
In This Article:
- By Harsh Jain
GoPro Inc. (GPRO) had a rough 2017 as the stock was down 13%. Also, the stock is off to an awful start heading into 2018 as it is down nearly 27% year to date. The action-camera maker operates in a brutally competitive industry and faces fierce competition from big camera manufacturers as well as smartphone manufacturers.
Nowadays, smartphone manufacturers are primarily focusing on improving their device's camera. Also, the new high-end devices are IP68 water-proof and dust resistant. The continuously advancing camera quality of smartphones will have an adverse on GoPro in future as it will obstruct the ability of action-camera maker to drive significant revenue growth.
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The intrinsic value of GPRO
Shares of GoPro tumbled slightly more than 27% in January. The action-camera maker said that is laying off more than 250 workers which appears to be the main reason behind that steep drop last month. Apart from this, the company also decided to exit drone market as it is tremendously competitive.
In addition, GoPro reported disappointing fourth-quarter results last month. For the holiday quarter, the action-camera maker shared a net loss of 30 cents, missing the analyst's estimate by 19 cents. Its revenue came in at $335 million, again missing the consensus by $5.2 million. Most significantly, that figure represents a drop of almost 38% year over year.
The company's revenue growth turned negative in the last quarter after delivering positive revenue over the past four quarters.
Although the company reduced its product prices in December last year, it was not enough to turn its fate around. Despite the reduction in rates, the units shipped by GoPro declined a whopping 40.5% in the holiday quarter which is highly disappointing. Also, the company's new spherical camera, Fusion, did not manage to boost its sales in the quarter.
Moving ahead, the action-camera maker is now aggressively focusing on enhancing its cloud offerings. The company launched its GoPro Plus cloud-based service in 2016, but it failed to make a meaningful impact on its earnings so far. Recently, the company improved its GoPro Plus offering which may be appealing, but again it will not be enough to help find its way back into the green.
GoPro CEO Nick Woodman recently said that the upcoming cameras in the other half of this year should help enhance margin. Investors, however, should not forget that GoPro has a proven track record of over-promising and under-delivering.