Smart Money is Betting Against GPRO Stock
GoPro, Inc. (NASDAQ:GPRO) got the worst beating on Thursday morning after its third-quarter earnings came out. Not only did the company miss out on analyst expectations, they even missed out on their own guidance. While GoPro CEO Nick Woodman tried his best to ward off investor skepticism over the company, GPRO stock is still down over 15% on Thursday.
Even though GoPro has a great product that’s fast becoming a phenomenon, GPRO stock is still getting battered. The management may have cited meager sales of the Hero4 Session and an under-funded marketing campaign as the reasons for the revenue miss, but the problem is far more deep-rooted than what meets the eye.
The Biggest Problem Facing GoPro, Inc. Stockholders
Having already been labeled as a “one-trick pony,” GoPro management has made little effort to diversify its product line. The company doesn’t roll out its software and entertainment lines any sooner than the first half of 2016, which means the fourth quarter won’t be any different for GoPro stockholders.
Many are already likening the company to BlackBerry Limited (NASDAQ:BBRY) whose founders-cum-CEOs single-handedly took the company from boom to doom. Lack of innovation in both its hardware and software is what led to its downfall. GoPro’s inability to achieve good sales figures on its latest cameras makes one question if the company is also heading down the same road.
Really, how many closely similar cameras can you sell? Unless you have a razor-blade model where you can have repeat customers or a groundbreaking innovation added to every new edition, you can’t have returning customers who are willing to upgrade.
One can argue that a great company like Apple has essentially been pulling most of its revenue from its single line of closely similar iPhones. But again, its software innovation has kept the brand growing. What’s missing in GoPro is a good software that complements its hardware. Take, for instance, the fitness tracking device manufacturer, Fitbit, Inc. (NYSE:FIT), which powers its hardware with a solid application that by far beats competitors like Garmin.
GoPro’s biggest problem has been lack of clear vision in its c-suite. The Hero4 Session did not sell as well as the company had expected because the management overpriced, or may I say, overestimated their product. Woodman says he has “done a terrific job of growing an ecosystem of products that help the world capture and share itself like never before.” But GPRO stockholders are still waiting to see the “ecosystem.”
So far it’s just a lone product. Woodman’s crazy persona of thrill-seeking skier and surfer while wearing GoPro cameras on his head and arms may have helped build GoPro into a hip brand amongst the youth, but his hubris over the company’s long-term survival will not be taken positively by GPRO stockholders in the long run.
The Bottom Line on GPRO Stock
At the current all-time low range, GPRO stockholders are finding solace in Buffett’s words; be fearful when others are greedy and greedy when others are fearful. But I would rather take heed from his following advice:
“I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
A good 40% of GPRO stock’s float is currently short. The smart money is speaking loud and clear, so I’m steering clear of this investment.