GoPro (GPRO) stock is down 21.8% this morning. According to its SEC filing from yesterday, the action-camera manufacturer has reduced its 2019 revenue guidance to $1.215 billion–$1.25 billion from $1.25 billion–$1.28 billion. The company also lowered its EPS forecast for 2019, to $0.33–$0.39 from $0.37–$0.49.
In comparison, analysts have forecast GoPro to post sales of $1.26 billion and EPS of $0.39 this year. As would be expected, the company’s revised guidance didn’t impress investors, sending its stock down considerably.
Why did GoPro revise its revenue and earnings estimates?
GoPro attributed its revised revenue and earnings guidance to delays in shipments for its Hero8 Black Camera. The company launched the Hero8 Black yesterday at $399. It also announced a dual-lens GoPro Max camera for $499.
In GoPro’s press release, CEO Nicholas Woodman stated, “It’s been 15 years since the first GoPro camera, and from the start our purpose has been to help people share experiences in exciting ways,” He added, “And we’re delivering on that purpose in a big way with this year’s new lineup. HERO8 Black, the Mods and MAX totally redefine what’s possible with a camera.” CNBC reports that GoPro’s management said a “late-stage production delay” could impact sales and profit margins in this year’s second half.
The stock has fallen 48% since May
GPRO stock is now trading at $4.03 and has fallen 48% since May. The stock has cost investors significantly over the years, losing around 95% of its market value since October 2014.
One problem GoPro faces is that it operates in a niche industry. Its action camera products are not required purchases like smartphones or laptops. Furthermore, its price points are pretty high for the average buyer in emerging markets such as India and China.
GoPro sales fell from $1.18 billion in 2016 to $1.14 billion in 2018. Analysts expect the company’s sales to reach $1.26 billion in 2021, which is similar to its revenue estimates for this year. Why would investors want to buy a company’s stock if it’s barely able to increase sales and struggling with profitability? In August, we identified GoPro as a stock to avoid due to its high-risk, low-return metrics.