GoPro Inc. (NASDAQ: GPRO) was the hottest thing since sliced bread when its personalized helmet and body-mounted cameras allowed anyone to become their own action filmmaker. Its shares soared to unbelievable and unsustainable heights above $90 in late 2014. Now GoPro’s stock price is challenging $5.
It was bad enough over the weekend when reports came out that GoPro was going to unload 200 to 300 workers. Most of those were said to be coming from the company’s struggling drone unit. Now GoPro confirmed job cuts, lowered its guidance and has confirmed that it is simply exiting the “aerial market.”
Nick Woodman, CEO and founder of GoPro, now has two choices that he should seriously be considering. The first is whether he should relinquish his daily management of GoPro. The second is whether he should take a nonexecutive chair role by bringing in a real outsider as CEO to allow GoPro to get back on track.
24/7 Wall St. named Nick Woodman as one of the 20 worst CEOs of 2017 with a 2017 price drop of 9% at the time of publishing. The Dow rose over 25% and the S&P 500 rose more than 19% in 2017. Unfortunately for Woodman, he’s already well underway to making the list (if not leading the list) of the 20 worst CEOs of 2018 based on the big stock drop after more bad news.
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In Monday’s news release about guidance, GoPro said it now expects revenue to be approximately $340 million for the fourth quarter of 2017, including a negative impact of approximately $80 million for price protection on HERO6 Black, HERO5 Black, HERO5 Session cameras and the Karma drone. Its non-GAAP gross margin for the fourth quarter of 2017 is expected to be between 25% and 27%. Thomson Reuters had the consensus estimate as $474 million in revenues.
GoPro is reducing its global workforce from 1,254 employees as of September 30, 2017, to fewer than 1,000 employees worldwide. It might not even matter that Woodman will reduce his 2018 cash compensation to $1. The company did talk about stronger brand loyalty and higher sell-through data, but there is obviously more to the story here that is negative than positive.
As noted about GoPro in our 20 worst CEOs review, GoPro was initially a significant growth company that sold its helmet-mounted action cameras for extreme sporting enthusiasts. Founder and CEO Nick Woodman scraped together cash from family and from selling shell jewelry and belts out of a Volkswagen van to launch GoPro. While the rise of the company was quite impressive initially, GoPro more or less still feels like a one-hit wonder. With the drone news out now, how is this not a one-product company?
Since its sales tanked in 2016, GoPro shares have languished at less than $10. The stock’s faltering performance alone would spell out a call for outside help to run the company. GoPro expectations are going to have to come down handily for 2018 without the drone unit. Thomson Reuters was calling for 2018 sales to rise to $1.42 billion, versus a prior forecast of $1.32 billion for 2017. That recovery from the $1.19 billion sales in 2016 is now under question.
According to a CNBC story on Woodman in early 2017, GoPro ran into production problems and its new launches have failed to engage the public. The company missed out on capitalizing on the rise and dominance of smartphones. In addition to running GoPro, Woodman has undertaken philanthropy and was a guest-host on “Shark Tank,” the entrepreneur reality funding show.
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The only good news for GoPro shares is that the stock has recovered handily from its initial drop. Its shares were last seen down only 19% at $6.06, after hitting a low of $5.04 on the day. That’s down from a 52-week high of $11.89, but Woodman has a hard time explaining his position, considering how high this stock used to be.
Woodman did at least do one thing right on Monday — he did not run into hiding. He just made an appearance on CNBC to explain what is going on with GoPro and the market it is participating in. He said the financial markets are fair and accurate in how they price (rewarding or punishing) on companies. Woodman also said he would consider GoPro being part of a larger company if it made sense in helping the brand.
GoPro was a $7.57 stock at the close of 2017. It may be a long year ahead for GoPro shareholders.
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