GoPro announced a top and bottom line miss after hours, sending the stock down more than 20% to $11.23. Shares are now down nearly 80% in the last 6 months.
Everyone keeps telling me the CEO is a great guy and GoPro is laying off 7% of its workforce. So I’m trying to be sensitive and respectful when I say there’s a super good chance this company gets sold to Cisco for about $2 a share unless they throw out the entire management team and start from scratch.
GoPro essentially missed the Christmas season this year. It released the HERO4 Session in July for $400. In September it cut the price to $300 while missing Q3 estimates. In December it dropped the HERO4 Session to $200, making it effectively the same price as GoPro’s entry level offering.
Customers responded by video taping stuff with their phone like normal human beings.
It’s the little touches that reveal a company on the brink of total collapse. Take for instance the way GoPro tried to spin the margin shortfall resulting from all the above discounts. Rather than just own the number GoPro invented a Non-GAAP world where it was able to sell all those HERO4 Session’s at $400. In that world GoPro cleared a cool 45% on every camera sold.
In the real world margins were considerably worse.
It seems like a small thing but GoPro is making a gimmick consumer product. Its entire year revolves around having a strong presence during the holidays. GoPro knew it had a problem with the HERO4 last summer yet the company was still screwing around with price points into December. The non-GAAP number here is an insult. It’s a cut-and-paste from some business model that hasn’t existed since last June.
I hope you’re not long shares. If you are I’d consider reading up on the history of companies like Sunbeam and Iomega before doubling down.
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Camera on a stick …… of dynamite.
The Gopro cameras are cheap China made cameras. The HERO, before the Hero 2 had unbelievably bad grouchy sound … I emailed a clip to tech support and they told me it was normal for that camera and that I should buy the Hero 2 if I wanted a better sound. The camera also often froze, and it required removal of battery to reset it … try that while scuba diving. I upgraded to the Hero 3 Black, and cannot believe how cheap it feels for a $400 camera. It still occasionally locks up and also often while navigating the menu it just exits the menu on its own. In other words it’s a very cheap quality product, video quality is great thanks to the AMBA chip, but unfortunately since there is no other product like it, it has no real competition which is what makes it so popular.
Iomega…haven’t heard that name in a long time. Maybe camera-on-a-stick IS the next zip drive haha
Father-in-law gave me a Hero 4 this Christmas, told my wife he “got a great deal.” Still in the box, will likely stay there. No idea what to do with it.
Sighhh… Well, would you sell here?
I would projectile vomit it from my portfolio. That’s probably a crappy trade but over the years I’ve started categorizing losers. 1. I was wrong on the fundamentals (most of the time) = sell 2. Management is a group of morons = downsize the position and spite-ride that bastard into the dirt/ “apply pressure”. 3 my timing sucked = position manage 4 I was wrong and the management stinks = sell and write down the trade (as in journal it… Why did you like the stock? What went wrong? Etc).
This is a #4. If GoPro got a miracle bid today you’d still have been wrong. Which is totally ok. I’ve taken multiple beatings. The key is learning from it. Never lose the same way twice.
Love your posts! Thanks for the entertainment and enlightenment.
Thank you! It’s nice to have a platform where I can stretch my mind a little bit. Particularly for such an obviously enlightened group of readers.