Will GoPro Investors Go Broke?

Although I have been a GoPro (GPRO) bear for a long time now, I am surprised to see the downfall in the stock. GoPro has fallen at a rapid pace ever since touching the all-time highs of over $94. The stock finally slid into single digit this week as the company shared weak earnings despite slashing down guidance just a few weeks ago.

GoPro reported EPS of -$0.08, missing the consensus target of $0 by a wide margin. On the revenue front, GoPro reported sales of $436 million, down a shocking 31% as compared to the corresponding quarter of the previous year, and missing the analysts’ estimates by $60 million.

GoPro was supposed to be a booming company, however the tremendous year over year decline in sales suggests that the stock was a bubble and GoPro’s business model is terribly weak.
The bubble has popped but I think GoPro still has more downside to offer, which is why I think investors should stay away from the stock.

Terrible management

While I believe that GoPro’s business model is very weak, a poor CEO should be held equally responsible for the company’s downfall. Nicholas Woodman is a terrible CEO and he has to be blamed for GoPro’s current state. In fact, I think saying Nicholas Woodman is a terrible CEO is an understatement. The Wall Street has its own share of bad CEOs. The likes of Jack Dorsey and Marrisa Mayer have been pretty poor at Twitter and Yahoo respectively. But Woodman makes Dorsey and Mayer look like Steve Jobs.

I am sure that with Woodman, GoPro is destined to continue its steep downward trajectory. The fact that GoPro’s business model is susceptible to competition and is built on a fad makes the long case for the stock poorer.

Conclusion

GoPro longs may be hoping for an acquisition, however I think the company’s terrible business model makes it unfit for acquisition. Although GoPro has ample of cash and its market cap is just over $1.15 billion, investors would be better off avoiding the stock.
Published on Feb 5, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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