The GoPro brand is a household name; we all know of the company’s 360 cameras; there are countless videos on Youtube of diving in the Caribbean sea, jumping off a plane, you name it, a GoPro camera caught it.
Sounds like a great company doesn’t it?
Well, today, GoPro dropped a number of bombshells:
1. 20% of its workforce is to be laid off
2. The Chief Operating Officer will be leaving
3. Revenue has slumped 37% year on year
This has resulted in a massive drop in its share price, and the market cap of the company is now about $950 million. Considering that projected revenue is about ~$350 mln per quarter, the valuation appears to be cheap, but this just goes to show how much faith investors have in the current plan and that the expectation is that revenue will contract even further.
The last quarter’s results actually churned out a profit of about $15 million but the lack of demand for the GoPro cameras is now clear after the significant revenue drop.
GoPro really needs to invent itself.
With the COO leaving and the CEO taking a minimal salary, along with shedding costs by laying off its workforce, is this the time to buy GoPro shares? It all depends on whether or not you have faith that GoPro can turn around their fortunes. Considering that the company first went public a few years ago at around $24, the current share price of $6.53 may be an attractive entry point for some investors. If the company could indeed turn itself around, possibly venture successfully into other technologies like VR, partner with other companies, develop new technology for phones, who knows how high the share price could go again.
However, to date, the company’s new ventures into new technologies (e.g drones) has not been successful. The company has had to recall their drone (called Karma) and had to re-launch it in 2017. The end result? Along with the other news released today, drone development will stop.
Given this kind of history of implementation, buying the share now could be a case of trying to catch a falling knife; the share price could fall even further.
Nevertheless, the GoPro brand is a powerful one and even if the company cannot turn itself around, a buyer may gobble it up at some point.
Only time will tell….
Disclaimer: Note that I have no position in GoPro, the article above is my opinion only.
