The well-known action camera maker has fallen on tough times as of late as sales dwindle, but at such a low price, is GoPro stock a buy right now?
Known for its pocket-sized gadget that captures adrenaline junkies activities, GoPro’s (NASDAQ: GPRO) shares are up around 30% in 2020 as of August 6. At its Q1 earnings call GoPro posted $119.4 million in revenue — a decrease of 51% year-over-year — which matched analyst estimates. While these figures don’t scream growth, the company is focusing on its online sales and could be a stock for bargain hunter investors!
The bull case for GoPro
The company is focused on cutting its operating costs and growing its digital sales amid the coronavirus pandemic. GoPro is now rebounding from its low in March and trimmed its workforce by 20% to save around $100 million in operating expenses for this year. The company is also aiming to shift a big focus to its website to reach a global market, which will further cut operating expenses.
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GoPro is also ramping up its plus subscription service which hopes to draw in more consumers. The GoPro Plus subscription platform allows users to back up unlimited full quality photos and videos to the GoPro cloud automatically. It’s paid users jumped by 69% from the year prior to 355,000 subscribers. As for GoPro’s online sales, it hopes that e-commerce will make up more than half of its purchases by 2021.
In addition, GoPros that sell for more than $300 accounted for nearly 90% of its first-quarter revenue for 2020, which shows there is a strong market for high-end cameras. This could be because more people are wanting to focus time on taking photos outdoors as they are restricted by lockdown measures or that they have extra money to spend on camera gear instead of fancy restaurant meals or nights out. The company is also backed by a stronger social media following, which jumped by more than 1.3 million across all social media platforms it partakes in during Q1.
The bear case for GoPro
The company’s finances aren’t in the best shape, posting a net loss in Q1 of $63.5 million, compared to $24.4 million at the same time in 2019. GoPro does have $117.4 million in cash and equivalents, after utilizing $68.3 million of net cash for operating expenses during the quarter. Although, it still does have long-term debt of $154.4 million and with the current economic circumstances it would be some time before it is debt-free.
There was also tension for the company concerning the U.S. – China trade war, with many companies including GoPro and Apple (NASDAQ: AAPL) left to deal with rising costs and pressure on profit margins. In the end, GoPro moved its production of cameras for North American markets to Mexico.
There are also concerns that since travel restrictions have been put in place, not as many people will want to purchase the company’s cheaper products for their adventure. On top of this, GoPro is also going up against tough competitors including the likes of Sony (NYSE: SNE), DJI, and Garmin (NASDAQ: GRMN). Additionally, GoPro recently withdrew its full-year guidance because of the uncertainty of the pandemic.
So should I invest in GoPro?
GoPro undoubtedly has some exciting new products in store for consumers, like its recently unveiled Zeus Mini — a magnetic and waterproof lighting system that can easily attach to the camera mounts. Although, the GoPro’s high-price point in the niche market could make the product too expensive in the economic climate we are facing.
The company is hoping its online sales and subscription-based service can ramp up and put a dent in the sluggish sales. GoPro is valued at around 1.1 times the average analyst target for this year’s sales, a value that investors might find attractive. However, the company has a lot of work to do to turn a profit and doesn’t look likely in the near future. I wouldn’t be getting my hands on this stock just yet.
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