With high risks and no major catalyst, GoPro Inc (NASDAQ:GPRO) stock continues to be a very risky bet going into 2017
What was supposed to be a year of promise for GoPro Inc (NASDAQ:GPRO) investors, has turned out to be another year to forget. Mired by inventory write-downs, delayed product launch and product failures, GoPro stock has hit one low after another. GoPro stock lost almost 50% of its value this year. On the plus side, the stock has performed better than last year when the stock had lost 70% of the value. If you are one of those investors who had bought the stock at its peak in October 2014, then you would have lost 90% of your investment!
But in spite of such heavy losses, there are many investors (1) who continue to be bullish about the company. According to them, the stock has over corrected and it is not gloom and doom all around. During the Thanksgiving weekend, the company came out with a press release which showed that the action camera maker was enjoying a strong demand. Unit sales of cameras were up 35% YoY with major retailers, while on GoPro.com the sales were up 33% YoY. Sales in China was up 50%, and in Japan, sales were up 125% in that weekend albeit on a lower base.
Moreover, the company plans to return to profitability next year. Demand for Hero 5 camera continues to remain strong. According to NPD group, since the launch on October 2, HERO5 Black has been the best-selling Digital Imaging device in the United States. However, it is unlikely that the company is going to become the darling of investors once again anytime soon.
Also Read: Should You Buy GoPro Stock After The Strong Holiday Season Sales?
The Missed Flight
While GoPro Inc (NASDAQ:GPRO) disappointed on several fronts this year, the biggest one was the failure of Karma drones. Launched amid much hype and fanfare, the drone was supposed to take the stock on an overdrive. Instead, it crash landed, taking the stock along with it. The recall of Karma drone not only resulted in lost revenues but was also a blow to its brand image. Not only that, the company is now facing lawsuits for violating Securities Exchange Act of 1936 and misleading shareholders.
The recall of karma, just after the earnings announcement and on the eve of the presidential election had raised many eyebrows. Was the company aware of the technical glitches in the drone during the earnings call? If it was aware, why it did not mention during the Q3 earnings call? The lawsuits allege that the company had the knowledge that the Karma drones were prone to losing power mid flight, causing them to fall out of the sky but didn’t disclose it during the earnings call.