GoPro Inc (NASDAQ: GPRO)
GoPro is having an incredible time in the pre-market this morning, running up on a rally that started last night. Ultimately, the gains are the result of an announcement that the company made yesterday with regard to cutting jobs. This was definitely a surprise, considering that GPRO had already cut about 15% of its workforce just months ago. Below, we’ll talk about what we’re seeing from the stock, why, and what we’ll be watching for ahead.
What We’re Seeing From GPRO
As mentioned above, GoPro is having a great time in the pre-market trading hours. At the end of the day, investors are clearly excited about the fact that the company is cutting more jobs. As a result, the stock is climbing. Currently (8:28), GPRO is trading at $8.14 per share after a gain of 10.75% thus far.
It’s All Smoke And Mirrors!
Before we get too far into this, we’d like to give credit where credit is due. Our partners at Trade Ideas were the first to alert us of the upward movement on GPRO. Of course, as always, when we got the alert, the CNA Finance team started digging to figure out why the stock was up, and as mentioned above, it’s up because of job cuts. In fact, after laying off about 15% of its employees a few months ago, the company announced last night that it would be cutting an additional 270 jobs.
Now we get into the gist of the section title… It’s all smoke and mirrors! The truth is that GoPro is, and for a long time, has been a struggling company. While the company did pioneer the industry of extreme action cameras, their ability to maintain control of that industry has fallen apart. The company lacks the fundamental ability to sell its products, even its flagship product, and that alone is a big concern, but it goes deeper than that.
Once GPRO finally realized that it couldn’t sell its own flagship product, it decided to jump into another industry, the drone industry with the Karma drone. Well, that went over like a mosquito at a dinner party. At the end of the day, drones already have a clear market leader with DJI, a company that has proven its ability to sell its products. So, once again, the company proved that it has a fundamental inability to market its products, and this time, an inability to even choose the right product to focus on.
Now the company is shrinking, and it’s happening incredibly quickly. While many investors are cheering this concept on, I believe it’s a sign that if you’re not already, it’s time to short the stock. The bottom line is that GPRO doesn’t WANT to layoff massive amounts of employees, it has no choice. If it can’t bring money in through the sales of its products, it can’t keep bleeding money out. Now, some may think that’s a great thing, but me on the other hand, I see it as a sign that we are nearing the end of the company. Truth be told, GoPro would likely be better off selling the rights to its product to a company that knows how to sell!
What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will be watching GPRO incredibly closely. In particular, we’ll be following the restructuring process and watching to see if the company decides to make changes on the marketing side. Nonetheless, we’ll continue to follow the story and bring the news to you as it breaks!
Update 10:53: GPRO continues upward on the news of layoffs. Keep in mind that the company has been on a steep decline as of late and will likely continue to fall in the long run. At the moment, the stock is trading at $8.56 per share after a gain of $1.21 per share or 16.46% thus far today.
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[Image Courtesy of Wikimedia]