GoPro (GPRO 2.89%) stock is trading at an all-time low and is down 60% in the past year. It's been a challenging period for the action-camera maker as it attempts to reach profitable growth.
Results for 2023 disappointed investors. Revenue of $1 billion was down 8% year over year. Management said intense competition forced the company to lower pricing. This directly impacted margins and led to a $32 million adjusted net loss last year.
The GoPro subscription business, which bundles services like cloud storage and video editing software, has been a silver lining, posting a 12% jump in subscriber count. However, this marked a sharp slowdown from the 43% increase in 2022.
Why I'm skeptical of GoPro's turnaround strategy
Guidance for 2024 leaves a lot to be desired. Management sees first-quarter revenue declining by around 14% but maintains optimism for a sales rebound in the second half of the year. Efforts to cut costs with a new round of layoffs announced last month are expected to narrow the recurring loss.
GoPro is betting that the launch of new products, including a camera for beginners, will help the company expand its user base. In March, GoPro announced the planned acquisition of Australia-based Forcite, which embeds technology in helmets, previewing an entry into this category, starting with providing what the company calls a "safer, more dynamic motorcycling experience through tech-enabled motorcycle helmets."
Ultimately, I'm not convinced these steps are enough to get the business back on track.
In my view, the biggest challenge GoPro faces is competition from smartphones. Camera technology in mobile devices has advanced significantly over the last several years, likely meeting the everyday video needs of most consumers. In other words, GoPro's core stand-alone camera products have become harder to sell, limiting its growth opportunity.
What's next for GoPro?
GoPro will need to prove in 2024 that it can at least stabilize sales to support a more positive long-term earnings outlook. The first-quarter report, set to be released on May 3, will be the next opportunity for management to update guidance.
All this comes amid an economic environment in which consumers are dealing with stubborn inflation and elevated interest rates. The risk is that GoPro continues to miss expectations, requiring a corporate restructuring and another reset of expectations.
The good news is that the company has a solid balance sheet, last reporting a net cash position of $120 million. This is a significant level of liquidity, equaling nearly 43% of GoPro's current $280 million market cap, and providing some financial flexibility.
Furthermore, GoPro stock is trading at 0.3 times trailing-12-month sales, which is a depressed valuation. That said, that figure likely reflects investors discounting shares based on the significant uncertainties, which I believe is justified in what will be a difficult year ahead.
Is GoPro stock a buy today?
GoPro is likely to remain volatile, with weak fundamentals and a poor outlook pressuring the stock. Even with shares trading sharply lower over the last few months, I haven't seen enough to feel confident that they've bottomed out.
