Why Is GoPro Stock So Low and Is It a Good Time to Buy

GoPro stock has been on a downward spiral, and many investors are wondering if it's a good time to buy. The company's struggles to regain its market share in the action camera market have led to a significant decline in its stock price.

One major factor contributing to GoPro's low stock price is its decreased revenue. According to the article, GoPro's revenue has been steadily declining since 2017, with a significant drop in 2020.

The company's failure to adapt to the changing market and consumer preferences has also played a role in its struggles. As mentioned in the article, GoPro's sales have been impacted by the rise of smartphones and the decline of the action camera market.

Investors are now looking for signs of a turnaround, but so far, the company has not provided a clear plan to regain its market share and increase its revenue.

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GoPro's stock price has been in a strong downward trend, moving to a record low and becoming a penny stock.

The daily chart shows that the GPRO share price has been below the key support at $1.15, its lowest swing on November 20 and August 7.

GoPro has remained below the 50-day moving average, while the Relative Strength Index (RSI) has formed a descending channel.

The company's growth has deteriorated, leading to a weak fundamental and a poor outlook that's pressuring the stock.

Results for 2023 disappointed investors, with revenue of $1 billion down 8% year over year.

Management said intense competition forced the company to lower pricing, which directly impacted margins and led to a $32 million adjusted net loss last year.

The GoPro subscription business has been a silver lining, but it posted a 12% jump in subscriber count, which marked a sharp slowdown from the 43% increase in 2022.

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GoPro's financial performance has been a major concern for investors. The company's revenue has been declining, with a 11% drop in Q1 2024 compared to the same quarter the previous year.

Its GAAP and non-GAAP gross margin have also decreased, down to 30.5% and 30.7% respectively, from 31.4% and 31.6% the previous year. This decline in gross margin has contributed to the company's net loss, which has increased to $47.8 million, resulting in a loss per share of -$0.31.

The company's adjusted EBITDA was -$33 million, a significant deterioration from -$10 million in the same quarter of the prior year. GoPro's cash and marketable securities remained flat at $133 million.

Guidance for Q3 2024 projects revenue at $255 million, a 13% year-over-year decrease, and unit sell-through of approximately 650,000 units, a 12% year-over-year drop. However, the company anticipates gross margin improvement due to new product sales, higher subscription revenues, and reduced product costs.

GoPro's operating expenses are expected to be between $365 and $370 million in 2024, resulting in an operating loss of $75 million. Despite this, the company remains optimistic about future opportunities and is committed to improving its gross margin in the second half of 2024.

GoPro's cameras sold have been declining, averaging 6.7% year-over-year declines over the last two years, implying increasing competition or market saturation. The company's revenue growth can be broken down into changes in price and volume, with the latter being the most critical to analyze.

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GoPro's ROIC (return on invested capital) has decreased significantly over the last few years, paired with its already low returns, suggesting few profitable growth opportunities. The company's poor financial performance has led to a short cash runway, exposing shareholders to potential dilution.

GoPro burned through $129.2 million of cash over the last year, and its $122.2 million of debt exceeds the $102.8 million of cash on its balance sheet. This is a deal breaker for many investors, as indebted loss-making companies spell trouble.

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Investors have been bearish on GoPro stock due to concerns about the company's ability to maintain its market share in the action camera market.

One major factor contributing to this bearish sentiment is the decline in GoPro's sales, which dropped by 32% in the first quarter of 2022.

The company's struggles to innovate and keep up with the competition have also led to a decrease in investor confidence.

In fact, GoPro's market share in the action camera market has been steadily declining since 2018, from 55% to 34% in 2022.

This decline in market share, combined with decreased sales, has led to a significant decrease in GoPro's stock price.

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GoPro's turnaround strategy is facing skepticism from investors due to a decline in ROIC, or return on invested capital, which has decreased significantly over the last few years.

The company's guidance for 2024 leaves much to be desired, with first-quarter revenue expected to decline by around 14%. Management's optimism for a sales rebound in the second half of the year may not be enough to get the business back on track.

GoPro's core stand-alone camera products have become harder to sell due to advanced camera technology in mobile devices. This limits the company's growth opportunity and makes it difficult to make a profit outside of rare strong holiday quarters.

The falling stock price makes it harder for GoPro to raise debt or equity financing, which it may need as early as this year. This dynamic makes it a discount that many investors are likely to avoid until the company shows true staying power.

GoPro's subscription business isn't big enough to maintain profitability, adding to the company's woes. Even with shares trading sharply lower over the last few months, investors haven't seen enough to feel confident that they've bottomed out.

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GoPro's stock price has been in a strong downward trend, moving to a record low and becoming a penny stock.

The daily chart shows that GoPro's share price has been below the key support at $1.15, its lowest swing on November 20 and August 7, and has remained below the 50-day moving average.

Investors will want to look for confirmation of a shift to positive price momentum, such as trading above its 20-day moving average, which is currently at $1.33.

GoPro trades at the low end of its 52-week price range of $1.16 – $3.80, and its P/S ratio of 0.2x is significantly discounted to peers in the Consumer Electronics industry.

Analysts have been bearish on the stock, with Wedbush analyst Alicia Reese lowering the price target from $2 to $1.50 while maintaining a Neutral rating on the shares.

The average price target for GPRO stock is $1.35, representing a 0.75% change from current levels, and GoPro is rated a moderate sell based on the three analysts' combined recommendations and price targets.

I wouldn't be confident that GoPro's shares have bottomed out, even with them trading sharply lower over the last few months.

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GoPro will need to prove in 2024 that it can stabilize sales to support a more positive long-term earnings outlook.

The company's first-quarter report, set to be released on May 3, will be the next opportunity for management to update guidance.

GoPro has a solid balance sheet, last reporting a net cash position of $120 million, which is a significant level of liquidity equaling nearly 43% of its current $280 million market cap.

This financial flexibility is crucial in an economic environment where consumers are dealing with stubborn inflation and elevated interest rates.

However, the risk is that GoPro continues to miss expectations, requiring a corporate restructuring and another reset of expectations.

GoPro stock is trading at 0.3 times trailing-12-month sales, a depressed valuation that likely reflects investors discounting shares based on the significant uncertainties.

Management sees first-quarter revenue declining by around 14% but maintains optimism for a sales rebound in the second half of the year.

The biggest challenge GoPro faces is competition from smartphones, which have advanced camera technology that meets everyday video needs of most consumers.

This makes GoPro's core stand-alone camera products harder to sell, limiting its growth opportunity.

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