Shares of action camera company GoPro Inc (GPRO) plunged 13.1% in 2017, according to data provided by S&P Global Market Intelligence, as operations continued to deteriorate. 2018 hasn't gone any better with shares falling 20.1% in the first ten days of trading.
GoPro has been trying to turn its business around after a terrible run since mid-2015. That's when a convoluted product lineup came back to bite the company, forcing simplification and the redesigned Hero cameras the company has today. In 2017, it appeared the strategy was starting to take hold when revenue jumped 27% in the third quarter and gross margin peaked above 40% again.
But as the fourth quarter went on it became clear that GoPro's business wasn't going as well as expected. Prices on cameras were reduced in December and the drone business never seemed to live up to GoPro's lofty expectations.
While shares sunk during 2017, fears that led to the drop were confirmed in early 2018. Management said sales for the fourth quarter would come in about $130 million below expectations at around $340 million and gross margin would be just 24% to 26%.
GoPro doesn't seem to have any traction turning its business around and continues to run into massive losses. In early 2018 management said they would abandon the drone business after Karma was never able to compete with DJI's rapidly improving drone technology.
The potential good news for investors is that management indicated it may be open to a buyout if the price is right. With shares trading below $6 after guidance was updated it may make sense to just cash out if a buyer emerges. For investors, I don't think this is a company or buyout that's worth betting on going into 2018.