GoPro (GPRO), once the dominant brand in the action camera market, is grappling with a growing list of competitors, leading to a decrease in market share and sales. Revenue for the most recent quarter is down 23% from the same period in 2023, and the company’s financial health is worsening, with an adjusted EBITDA loss of $33 million. Once trading at over $89 per share, recent struggles have significantly dropped the stock to just over $1.34.
Dwindling cash reserves further compound these issues, leaving GoPro in a precarious position for future investments and operational stability. This has prompted the recent announcement of a 15% cut in the workforce. The stock trades at a decent value, but investors may want to stay on the sidelines and revisit once the company has demonstrated positive momentum in its revenue and earnings.
GoPro Looks to Rebound by 2025
GoPro specializes in developing and selling cameras, wearable and mountable accessories, and software services. The corporation offers a variety of cloud-connected waterproof cameras and subscription services that provide access to a video editing app, cloud storage, camera replacement, and damage protection. Its products are sold directly through various retail and wholesale distributors on its website.
The company has faced notable challenges in recent years. Factors such as postponed product launches, diminished consumer spending, a decline in camera sales on the company’s official website, increasing global competition, and foreign exchange rate fluctuations in China and Japan have hindered the business’s performance.
The company forecasts that delayed product releases will cause sales to drop by approximately $100 million and negatively affect revenue by about $20-$25 million in Q4 2024. Total unit sales and revenue are predicted to be down 15% and 13% from the previous year, respectively.
However, GoPro plans on launching two new cameras in September and anticipates a return to profitability in 2025. To achieve this, the company intends to slash operating expenses to around $320 million, a reduction of close to $50 million from midterm 2024 projections. It plans to cut non-recurring technology development expenses, marketing and salary costs, and other operational costs. To further these expense reduction efforts, the company has announced a workforce reduction plan, expecting to cut about 15% of jobs by the end of 2024.
GoPro’s Recent Financial Results & Outlook
The company recently reported Q2 2024 financial performance. Revenue was marked by a 23% year-over-year drop, reaching $186.2 million, although it surpassed analysts’ estimates of $170.02 million. A significant contributor to the drop in revenue was the decline in camera sales, which were 576,000 compared to 704,000 in the same quarter last year. However, the subscription and service revenue experienced year-over-year growth of 8% to $26 million, mainly attributed to improved retention rates bringing about 4% ARPU growth, ending Q2 with a subscriber count of 2.53 million.
Other key performance indicators include a GAAP and non-GAAP gross margin of 30.5% and 30.7%, respectively, down from 31.4% and 31.6% the previous year. The company’s adjusted EBITDA was -$33 million, compared to -$10 million in the same quarter of the prior year. The company’s net loss extended to $47.8 million from $17 million in Q2 2023, resulting in a loss per share of -$0.31, a further deterioration from -$0.11 in Q2 2023. The company’s cash and marketable securities remained flat at $133 million.
Following second-quarter results, GPRO management has issued guidance for Q3 2024 with revenue projected 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, gross margin improvement is expected due to new product sales, higher subscription revenues, and reduced product costs.
The company anticipates full-year operating expenses between $365 and $370 million in 2024 and an operating loss of $75 million. Regardless, GoPro remains optimistic about future opportunities and is committed to improving its gross margin in the second half of 2024. Going into 2025, GoPro will significantly lower operating expenses to promote a return to profitability.
What Is the Price Target for GPRO Stock?
The stock has been on a volatile, extended downward slide, scoring a beta of 1.67, shedding over 86% in the past three years. It trades at the low end of its 52-week price range of $1.16 – $3.80 and could show signs of a turn in price momentum by trading above its 20-day (1.33) moving average. However, it still trades below the 50-day (1.43) moving average, so investors will want to look for confirmation of a shift to positive price momentum. With a P/S ratio of 0.2x, the stock is significantly discounted to peers in the Consumer Electronics industry, where the average P/S ratio is 4.91x.
Analysts following the company have been a bit bearish on the stock. For example, Wedbush analyst Alicia Reese recently lowered the price target from $2 to $1.50 while maintaining a Neutral rating on the shares, noting that while the firm beat Q2 expectations, anticipated product delays have pulled back the company’s trajectory.
GoPro is rated a moderate sell based on the three analysts’ combined recommendations and price targets. The average price target for GPRO stock is $1.35, representing a 0.75% change from current levels.
Final Thoughts on GoPro
GoPro finds itself at a crossroads, as its struggles with delayed product launches, reduced consumer spending, heightened competition, and a dwindling market share have resulted in a steep decline in the share price. Yet, the firm plans to launch new products amid intense marketing initiatives and projects a return to profitability by 2025.
These efforts have not yet translated into the desired financial uplift, leaving the company in a precarious state. Investors may want to tread cautiously until GoPro demonstrates a positive shift in revenue and earnings momentum.
