What happened

Shares of GoPro, Inc. (NASDAQ:GPRO) fell 20% in November, according to data provided by S&P Global Market Intelligence, after the company reported its third-quarter earnings at the beginning of the month. The quarter itself wasn't all that bad, but investors weren't happy with management's fourth-quarter outlook.

Stock chart with yellow arrow pointing down.

Image source: Getty Images.

So what

GoPro's third quarter may not have seemed all that bad at first glance. Revenue was up 37% year over year to $330 million and gross margins increased to 40%. The company also improved its average selling prices (ASPs) by 22% and net income went back into positive territory, after a loss of $104 million a year ago. 

So what were investors so upset about? The company said it expects revenue between $460 million and $480 million and that adjusted earnings will be between $0.37 and $0.47. That outlook, however, failed to match up with analyst expectations of $520.5 million in sales and earnings per share of $0.56.

On the third-quarter 2017 earnings call, GoPro founder and CEO Nick Woodman said, "We're actually feeling really good about our guidance for Q4," and noted that channel inventory will be down and that GoPro will be profitable on both a GAAP and non-GAAP basis.

Woodman may have felt good about the fourth-quarter outlook, but investors clearly didn't feel the same way.

Now what

Its shares have been on a wild ride over the past year, and I'd expect nothing less after GoPro reports its fourth-quarter earnings in a few months. Despite some positive strides by the company, there are still a lot of unknowns and that's bringing increased volatility to the stock.

GoPro is still in the midst of turning itself around, and the third quarter was a solid step in that direction. But I think investors are starting to question whether GoPro is a good long-term investment. Management hopes that sales of its new Hero 6 and other cameras (as well as its Karma drone) will remain strong in the fourth quarter, but sooner or later, the company will have to figure out how to create an ecosystem that locks in its customers. Until it does, there will be more volatility ahead for the action-camera maker.