GoPro, Inc. GPRO is down 8% to $8.13 per share after Goldman Sachs GS analyst, Simona Jankowski, downgraded the company’s rating from Neutral to Sell.
GoPro’s rating was cut because Jankowski expects the camera company to continue to struggle fundamentally. “The company exited a disappointing holiday season with excess inventory, as noted by key supplier Ambarella AMBA. It also faces a new competitor, YI Technology, whose products are competitive with GoPro but 25%-33% lower price point,” Jankowski added.
Along with these factors, GoPro has been closing down facilities and laying off employees due to large operating expenses. All of the above combined makes Jankowski forecast negative free cash flow until the fourth quarter of 2017.
GoPro released disappointing fourth quarter earnings in February. The company missed its own revenue estimate for the quarter, despite the new products on the market: the Hero5 camera and its drone, the Karma. GoPro also reported a 26.8% drop in revenues year-over-year to $1.62 billion for full-year 2016.
Reasons behind their fourth quarter performance included production issue and delay shipment with the Hero5 Black cameras and the Karma drone. Furthermore, GoPro stopped selling its products on Amazon.com AMZN in October due to a pricing dispute.
Could GoPro be Snap’s Future?
GoPro, the California action camera company, went public in 2014 at $24 per share and jumped to $31 per share shortly after initial trading opened. However, GoPro has been unable to prove that it can achieve growth or profitability and is trading at a third of its initial trading price.
Snap, Inc. SNAP has been through ups and downs since its initial opening last Thursday. It opened at $24.42 per share, and reached its highest on Friday to $29.24 per share. Snap is currently down 9.5% to $24.54 per share. Besides their current fall in stock, these two companies share other troubled similarities. Both companies’ premises are capturing moments as they happen through the user’s perspective. While Snapchat packages itself as a camera company, it started developing wearable technology like the Spectacles; GoPro, on the other hand, aimed to be a social media company with the content generated from its users and selling advertising spots when the demand for its devices dropped.
Though the similarities are here, it is too early to say if Snapchat will become the next GoPro.
8 Stocks with Huge Profit Potential
Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Goldman Sachs Group, Inc. (The) (GS): Free Stock Analysis Report
GoPro, Inc. (GPRO): Free Stock Analysis Report
Ambarella, Inc. (AMBA): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research