Sell: GoPro (GPRO)
From Game Changers
Updated from Investment Digest 768, April 22, 2015
The time has come to sell GoPro (GPRO).
There remains a lot of long-term potential from some of its recent projects, specifically its virtual reality efforts and its GoPro Studios content. The company’s Oculus Rift is still on its way; Facebook announced recently that the new virtual reality headset will come out in the final days of March. But the earnings report from GoPro has arrived earlier than expected—and it wasn’t the blowout, higher-than-expectations report I anticipated.
GoPro said that it had generated $435 million in sales during the last quarter, the all-important quarter that includes holiday shopping results. This was well below analyst estimates for $512, expectations that had already been lowered in the wake of its previous poor earnings report.
What’s more, GoPro cited inventory issues, pricing issues with its newest cameras and over-commitments to suppliers as factors that hurt margins.
In a nutshell, we’re seeing cooling enthusiasm, deteriorating margins and a struggle to launch new products.
As a result, GoPro has decided to cut 7% of its workforce, just over 100 jobs.
We may very well be back into the stock at a later date, but we’ll need to see clear evidence that these issues have been sorted out, that its virtual reality and original content projects are panning out and that margins are under control.
Sell GoPro (GPRO).
Ian Wyatt, Game Changers, www.wyattresearch.com, 866-447-8625, January 15, 2016