Production and Growth Issues Cloud GoPro Stock
GoPro Inc (NASDAQ:GPRO) announced its third-quarter results after the closing bell on Thursday, November 3, and it was a huge disappointment. The company missed expectations on both the top and bottom lines. GPRO stock was already down seven percent in the last trading session and closed at $11.94. After posting weak guidance for the fourth quarter, GoPro stock is en route to touch its 52-week low of $8.62.
GoPro posted a third-quarter loss of $0.60 a share on revenues of $240.5 million. The company had posted a profit of $0.25 a share last year on revenues of $400.0 million. The full-year guidance was also lowered as the company now expects $1.25 billion to $1.3 billion in revenue, as compared to the previous target of $1.35 billion to $1.5 billion. However, for 2017, the company expects double-digit year-over-year revenue growth. (Source: “GoPro Announces Third Quarter 2016 Results,” GoPro Inc, November 3, 2016.)
The company makes a major portion of its revenue in the fourth quarter, and the weak guidance is an indication that there are serious problems lurking beneath. The action camera company had launched its new “Hero 5” camera and “Karma” drone in September. The management has confirmed that its shipments were delayed during the quarter because of production issues. This does not generate confidence among investors and would hit GPRO stock hard.
CEO Nicholas Woodman said that they are unable to catch up to demand. The company has huge expectations from its new Hero 5 cameras and the company’s first drone, Karma. However, it would take GoPro another year before it can churn out any profit.
GoPro’s production issues seem to have come at the worst time, as the GPRO stock is already down more than 50% of its 52-week high. There have been issues before, as well. Sales of the new camera were stopped on Amazon.com, Inc. (NASDAQ:AMZN) last month when GoPro negotiated the price with Amazon. Although the sales have been resumed now, the company still has some ground to cover.
GoPro is also looking at new growth areas and has launched “GoPro Plus,” its Camera-to-Cloud Content Management Solution. The company’s end-to-end hardware and software storytelling premise bodes well going forward. However, with a 40% decline in revenue and production issues to handle, it would be a long road to gains for GoPro stock.