Incompetent Management May Kill GoPro
Over the last few months, I have been recommending investors to short or sell GoPro (GPRO). Since my initial call, shares of GoPro have fallen as much as 40%. The downfall was propelled by the company's poor earnings report. GoPro released its Q4 earnings earlier this week and despite the company reducing its guidance in the previous months, it missed the mark by a wide margin.
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The intrinsic value of GPRO
Earnings miss
For the reported quarter, GoPro losses per share of 8 cents. On the revenue front, the company's top-line shrunk 31% year over year as it recorded sales of roughly $436 million, widely missing the consensus target of $496 million.
The bad news doesn't end there, as the company also lowered guidance for the upcoming quarter. The company now expects Q1 revenue of $160 million to $180 million, far below the $298 million that the analysts were expecting. For FY 2016, GoPro expects to see revenue of $1.35 billion to $1.5 billion, also below a $1.61 billion consensus. GoPro also announced that CFO Jack Lazar will be leaving the company. All in all, the company looks to be in bad shape, and I don't expect it to perform any better in the future.
Although GoPro's business model was built on a fad, the company's failure can also be attributed to the failures of CEO Nick Woodman. Woodman has failed to build on GoPro's hype, and now that the fad is dying, the stock is heading toward the abyss. Hence, I believe instead of the CFO, Woodman should have resigned from the company, as he clearly isn't the right man to take GoPro forward.
GoPro's guidance for the next quarter is about 40% lower than the analysts' estimates, and this clearly signifies that the fad is now dead. In fact, I highly doubt that GoPro will be able to meet the bottom-end of its full year guidance, which is why I expect the stock to continue underperforming.
Conclusion
GoPro's stock sold off massively following the disappointing report and even fell to single digits; however, it has since staged a minor comeback. Still, investors should not bet on the company's turnaround and stay on the sidelines. The presence of an underperforming CEO along with a dying fad is not good for the stock, and it will eventually return to single digits sooner rather than later. For the reasons mentioned above, I think GoPro is still a sell.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 3 Warning Signs with GPRO. Click here to check it out.
The intrinsic value of GPRO
