GoPro (NASDAQ: GPRO) recently reported weak third-quarter earnings that missed both top- and bottom-line estimates, marking its first miss since going public last July. Guidance for the current holiday quarter also came in well below expectations, causing the stock to plunge and extending its year-to-date decline to over 60%.

Image source: GoPro.

In an effort to appease investors, GoPro announced a $300 million stock buyback for the next 12 months, which would be enough to repurchase about 8% of its outstanding shares at current prices. That decision stunned many investors, who saw the buyback as an admission that its days as a growth stock were over. Let's take a closer look at GoPro's buyback and whether or not the company made the right call.

What went wrong
Last quarter, GoPro's revenue rose 43% annually to $400 million, which missed its own guidance of $430 million to $445 million. Non-GAAP net income rose 103% to $36.6 million, or $0.25 per share, which missed analyst expectations by $0.04.

GoPro blamed a large portion of that miss to weak sales of the ice-cube sized HERO4 Session. CEO Nick Woodman admitted that the company had "priced the products too high at $399, which caused consumer confusion" between the identically priced (and more popular) HERO4 Silver. The subsequent $100 price reduction for the Session in September caused a $19 million writedown for the quarter. Woodman also admitted that GoPro "underfunded marketing in the second and third quarters of the year," and it would take a "more aggressive advertising approach in the fourth quarter" with a return to TV ads.

The unimpressive Session.  Image source: GoPro.

This means investors should expect total operating expenses to rise over the next few quarters. Last quarter, GoPro's operating expenses rose 44% annually to $159 million. Sales and marketing expenses rose 38% to $66.4 million, while R&D expenses climbed 59% to $67.4 million. All the things Woodman has promised -- drones, VR rigs, a cloud platform, new flagship cameras, and a more aggressive advertising campaign -- could cause those costs to surge.

Better uses for $300 million
Therefore, it seems a bit reckless for GoPro to allocate $300 million to a buyback, especially when its cash position grew just 18% annually to $280 million last quarter. In the first nine months of 2015, GoPro had an operating cash flow of $136.8 million, which doesn't give it much room to raise expenses across the board and buy back shares. It would also be silly to take on debt for the first time simply to fund a buyback.

Instead, it would be more logical for GoPro to set aside the $300 million for R&D, marketing, and acquisitions. The company has only made two notable acquisitions to date -- video compression company Cineform and Kolor, a VR company that makes 360-degree videos. Buying up additional players could give GoPro more technologies to beef up its digital and media ecosystems.

The counterargument
On the bright side, if GoPro buys back shares around current levels, it can set a bottom for the stock and defend its IPO price of $24. The move will also reduce the stock's valuation multiples and make it more appealing to value investors. If the stock bounces back, GoPro will make a decent profit investing in itself. Those gains could then be reinvested in the company's R&D and marketing efforts.

Woodman suggested that marketing costs will rise, but GoPro's core method of advertising through social media won't likely change. For example, GoPro's "Jump" partnership with Alphabet's (GOOG 0.96%) (GOOGL 0.81%) Google to create 360-degree videos, VR, or drone content could further boost mainstream awareness of GoPro cameras. If social media advertising is more effective, pricier advertising alternatives can be scaled back on a seasonal basis.

GoPro and Google's Odyssey VR rig. Image source: GoPro.

During the conference call, Woodman noted that GoPro was still the "number one brand channel on YouTube" and recently "surpassed one billion cumulative views." Based on its ties with Google, GoPro could potentially secure product development and marketing deals with the tech giant to boost exposure and cut costs, which would leave more room for buybacks.

My personal take
Despite those possibilities, I still think GoPro's buyback was a hasty attempt to add a silver lining to a weak earnings report. It would be wiser to use that cash on acquisitions, R&D, and marketing instead.

I'd much rather see GoPro insiders buy shares with their own money. Over the past three months, GoPro insiders have sold over 18 times as many shares as they've bought. Reversing those numbers would definitely give me more confidence in the company than a $300 million buyback.