GoPro (NASDAQ:GPRO) and Fitbit (NYSE:FIT) both burned a lot of investors. GoPro, which popularized action cameras, went public in 2014 at $24 and surged to the low $90s over the following months, but now it trades at about $6 per share. Fitbit, the first mover in fitness trackers, went public at $20 per share in 2015 and soared to the high $40s a few months later. It's worth about $4 per share today.

GoPro and Fitbit created new markets, but cheaper competitors easily copied their core products. Upgrade cycles were painfully slow, and new technologies created further challenges -- such as improved smartphone cameras and full-featured smartwatches.

GoPro's HERO7 Black camera.

Image source: GoPro.

GoPro and Fitbit both expanded their businesses into new markets to offset those declines. GoPro launched virtual-reality and 360-degree cameras, while Fitbit sold beefier trackers and smartwatches. Both companies also expanded their digital ecosystems with subscription services to lock in customers.

Many investors left GoPro and Fitbit for dead, but both stocks now trade at less than their sales estimates for the current year. So is either stock a viable contrarian play for value-seeking investors?

GoPro's unexpected recovery

GoPro's revenue fell 3% annually in 2018, compared with flat growth in 2017 and a 27% decline in 2016. That growth looks dismal, but its revenue surged 20% annually during the first quarter.

GoPro mainly attributed that growth to rising demand for its HERO7 Black camera (which generated 90% of its sales), higher average selling prices, annual market share gains in the U.S. action camera market, and robust growth in Asia. Its number of GoPro Plus subscribers also grew 50% annually to 220,000.

GoPro's adjusted gross margin also expanded almost 10 percentage points annually to 34.2%, as it reduced its operating expenses 16%. Those improvements narrowed its adjusted net loss from $47.4 million to just $10.2 million.

For the full year, GoPro expects its revenue to rise 7%-10%, with adjusted earnings of $0.25-$0.45 per share -- compared with a loss of $0.23 per share in 2018. It expects that recovery to be supported by higher margins from GoPro Plus, higher camera shipments, and stable prices -- which indicates that the camera maker isn't worried about the competition.

Simply put, GoPro right-sized its business and focused on dominating its core niche market instead of continuing to clumsily expand into adjacent markets such as drones -- an idea that flopped with the disastrous launch of the Karma in 2016. It's also wisely locking in those customers with GoPro Plus to mitigate the impact of longer upgrade cycles.

Fitbit's Versa Lite, shown in an array of band colors.

Image source: Fitbit.

A tougher battle for Fitbit

Fitbit's revenue fell 6% in 2018, compared with its 26% decline in 2017 and 17% growth in 2016. Fitbit's revenue rose 10% annually during the first quarter, thanks to higher shipments of its new Charge 3, Inspire, Inspire HR, and Versa Lite devices -- which accounted for over two-thirds of its sales.

However, its average ASP still fell and its adjusted gross margin plunged from 47.1% to 34.2% -- indicating that it was still struggling to stand out in the crowded wearables market. Fitbit reduced its operating expenses 13% annually, but its adjusted net loss narrowed only slightly, from $41 million to $38.1 million.

Fitbit expects its full-year revenue to rise 1%-4%, but it still expects its average selling prices to decline as it tries to grow its "community of active users." In other words, it's willing to sell cheaper devices to fend off rivals including Apple and Xiaomi, which both eclipsed the former market leader in annual shipments last year, according to IDC.

Fitbit anticipates an adjusted gross margin of 40% for the year, compared with 40.9% in 2018. However, it expects the growth of its Fitbit Health Solutions software services to be slightly accretive to its gross margin.

Fitbit didn't provide any full-year earnings guidance, but analysts expect an adjusted loss of $0.15 per share, compared with its loss of $0.76 per share in 2018. That outlook indicates that Fitbit isn't doomed, but it faces a tougher uphill battle than GoPro.

The winner: GoPro

I'm not a big fan of either stock. I generally favor long-term investments, and it's hard to tell where GoPro and Fitbit will be in just five years.

If I had to choose one today, I'd stick with GoPro. It faces less competition, since many of its challengers backed out of the market, and it has a clearer path toward profitability. Fitbit's outlook is murkier, and it could struggle to roll with the punches as Apple, Xiaomi, and other companies launch new wearable devices.