GoPro stock tumbled by more than 8% to as low as $12.76 per share in extremely heavy volume on Monday after an analyst warned that his checks suggest inventory levels of the company’s cameras are quite high. Fifteen minutes before closing bell, more than 9 million shares had changed hands, compared to the average daily trading volume of 6.54 million shares.
Can GoPro management turn things around?
Pacific Crest analyst Brand Erickson continues to rate GoPro stock at Sector Weight but pointed to signs of weakness in the camera maker’s supply chain as support for his view that the company may not be able to save itself. He remains a skeptic on whether the recent acquisitions and new software offerings will give it a boost and also cut his forecasts for units and average selling prices.
He seems to see a bit of hope in the upcoming drone launch and believes that the Karma quadcopter might cause a glimmer of optimism in GoPro’s brand to continue for now. The company is planning to release its first drone toward the end of the June quarter, and Erickson is projecting sales of 5 million to 6 million units in its first year of release.
GoPro inventory levels look high
The Pacific Crest analyst said his checks of stores in the U.S. indicate that the number of days of inventory are approaching their all-time highs and that sell-through plunged by about 40% just in the U.S. alone during the first quarter. Erickson pegs the number of days of inventory at about three weeks and said it has held steady there for about the last month. He adds that sell-through run-rates look closer to 800,000 to 1 million units each quarter compared to Wall Street estimates of about 1.1 million in the second quarter and 1.2 million to 1.3 million in the third.
He adds that the Karma should double GoPro’s total addressable market and might offer near-term support, in the long, term, he still sees softness in the company’s future because of weakness in the core action camera business. The analyst clarified that it isn’t GoPro’s products the problem but rather that there just aren’t enough buyers because they fall into a very small niche.
GoPro stock may tumble further
GoPro is scheduled to release its next earnings report on May 5, and if today’s virtual bloodbath is any indication, things could go from bad to worse for its stock, particularly if it misses expectations. Wall Street expects sales to plummet to less than half of what they were in the year-ago quarter from $363 million in last year’s first quarter to $169 million this year.
Analysts are also expecting losses of 59 cents per share, compared to last year’s profit of 24 cents per share. For the full year, GoPro is expected to lose 76 cents per share.
