GoPro (GPRO -1.85%), one of a clutch of 2025-edition meme stocks that surged in price earlier this summer, hasn't been going very far this week. On Monday evening, the company published its latest quarterly earnings report, and this sapped any energy left in that meme rally. The following day, the stock suffered a nearly 4% decline, and in reading that earnings report, we can see why.
A fuzzy picture
Firstly, in line with several previous quarters, GoPro again reported a significant decrease in revenue. Its top line eroded by 18% year-over-year to land at $153 million. That was due largely to sales of its core product, action cameras, sliding by 23% to roughly 500,000 units. Subscription and service revenue, a relatively small but critical contributor to the top line, went sideways at $26 million.
Image source: Getty Images.
On a brighter note, GoPro managed to trim its net loss under both GAAP and non-GAAP (adjusted) standards. The adjusted net shortfall was $12 million, or $0.08 per share, exactly two-thirds narrower than the $36 million loss in the year-ago period. Yet it remained stubbornly in the red on the bottom line.
Despite the rather negative investor reaction, GoPro actually posted a mixed quarter with those headline figures. After all, it beat the consensus analyst estimate for revenue (of just over $146 million), although it slightly missed for adjusted net loss ($0.07).
But as any seasoned investor is aware, the law of gravity frequently applies with stocks. What comes up must come down, and for a stock that flies high -- like GoPro did when it was tagged with emotion-driven meme stock status in mid-July -- the fall to earth can be sharp and sudden. GoPro's decline hasn't (yet) been steep and it's still up 20% year to date; likely the revenue beat and only slight bottom-line miss have something to do with that.
The trend isn't a friend
But since I'm a fundamentals-focused investor and analyst, I think it's important to tease out the dynamics behind GoPro's numbers.
It wasn't so long ago that the company's innovative adventure cameras were all the rage, propelling the stock's popularity. Before the COVID pandemic, people were getting out into the world, and social media sites like Meta Platforms' Instagram offered suitable venues for broadcasting footage of mountain bike rides, ski runs, exploratory walks in foreign cities, etc.
What happened to reverse that trend? In a word, smartphones.
The world is now packed full of these devices, which are affordable to folks of even modest means. Wrap a smartphone in a reasonably tough, weatherproof case -- which isn't a considerable investment these days -- secure it somehow to your person, and instantly you have an action camera to document that cool axe-throwing session or bungee jump.
Across its history, GoPro's cameras have won praise for their utility, ruggedness, and the quality of their output. Yet it's hard to justify spending, say, $360 for a HERO13 (without accessories) when that ever-convenient iPhone can deliver results that at least approach what you'd get from the GoPro. Plus, in this cluttered modern life of ours, who needs yet another device or subscription service?
Artificial hopes?
In my view, management has been doing what it can to get the growth train running. Years ago it did a fine job establishing that subscription and service revenue stream, which is holding steady (and producing plenty of the green stuff with that $26 million quarterly figure).
More recently, just after the meme stock rally in the company began, it announced an opt-in artificial intelligence (AI) training program. In it, U.S. subscribers to GoPro services can volunteer to make their content available for AI developers to build and enhance their models. The company said it will share 50% of the license fees generated by such efforts, meaning it's in front of a new revenue source.
Yet as exciting and high-potential as AI is, I doubt this and any other valiant revenue-boosting effort will turn around GoPro's fortunes. Dedicated action cameras are looking like the hot technology of the past, and since the company is still centered on this hardware, I think more declines are on the way -- ditto for those red bottom-line numbers.
