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Bear Of The Day: GoPro (GPRO)

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It looks like the GoPro (GPRO - Free Report) fad may be coming to an end. Over the last 5 years, these shares have plummeted over 94%, and any sign of a comeback seems to be dwindling, with its most recent earning report illustrating a 54% year-over-year decline in sales. Sell-side analysts are increasingly pessimistic about this dying brand pushing this stock into a Zacks Rank #5 (Strong Sell).

GoPro is a video camera company meant for active individuals, whether you are in extreme sports, or just an adventurer. This company is known for its fantastic video advertisements on YouTube that people watch for entertainment, and they really are entertaining.

The problem with the business model is that there is no reoccurring revenue, and consumers that have one of GoPro's devices don't have an incentive to get another. Filming action shots are fun, but unless you are making a living from doing so, there is no reason to keep getting the latest GoPro model if the one you own works just fine.

Financials

There was an initial boom in sales when the company first went public in 2014, and expectations were huge for this exciting new retailer. I know quite a few people who bought a GoPro when it first got big.

GoPro was even able to turn a profit in its first two years as a publicly-traded company, but since then, its operational performance has gone south along with its stock price. 

My friends who purchased them had some fun with the devices but were not extreme sports professionals and had no need to upgrade to the company's latest tech. The iPhone/smartphone camera more than suffices for the needs of the average Joe. GoPro's core consumers are just too niche.

GoPro has been losing money annually since 2016, and its cash reserves are dwindling. If this firm isn't able to substantially restructure its business model and push its topline, I fear the company may not exist for much longer.

Take Away

GoPro is trading at extremely low multiples leaving room for opportunity if this company can make systemic changes in its operations, but I wouldn't get my hopes up. I wouldn't recommend any position on GPRO.

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