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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