Can GoPro Stay in Business as It Burns Cash? Can Investors Believe Management?

By Douglas A. McIntyre Updated Jan 13, 1:31AM EST · Published Nov 4, 8:40AM EDT

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Can GoPro Stay in Business as It Burns Cash? Can Investors Believe Management? — © Thinkstock

GoPro Inc. (NASDAQ: GPRO) posted a huge drop in its cash position last quarter, along with a massive operating loss. If the company cannot quickly turn around its fortunes, management will need to worry about the size of its savings account.

For the period that ended September 30, GoPro had $131 million in cash and $93 million in marketable securities. In the same period a year ago, it had $280 million in cash and $194 million in marketable securities. GoPro’s operating loss for the quarter was $116 million. The company bought Splice in February for $105 million. Most certainly, with a falling cash balance, GoPro cannot buy itself revenue.

GoPro’s forward statements are not believable, in light of its recent performance, and management’s ability to forecast. It is also essentially a one-product company, and that product does not sell very well.

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GoPro’s forecast:

Fourth Quarter 2016

Revenue of $625 million +/- $25 million
GAAP and non-GAAP gross margin of 40% +/- 1%
GAAP diluted earnings per share of $0.15 +/- $0.05
Non-GAAP diluted earnings per share of $0.30 +/- $0.05
GAAP and non-GAAP tax rate of 12%
Fully-diluted share count of approximately 146 million

Against this, Thomson Reuters estimated $319 million in revenue for the third quarter, while actual revenue was $240 million. Imagine if it continues to miss top-line estimates every quarter for the next several. The cash burn would be terrific.

Shares were down more than 18% to $9.70 in Friday’s premarket. The 52-week trading range is $8.62 to $26.12.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.