Economy - - Dec 17,2016
Action camera company GoPro witnessed a major plunge in its stock, as shares fell by 2 percent this week to its lowest level ever.
GoPro has gone through some terrible past weeks, and in fact, the company has been falling since the beginning of the year. It has lost more than half of its stock values in 2016. However, there was no clear reason for this week’s slump.
Amid the falling stocks, GoPro also announced to lay off 15% of its staff last month and permanently shut down its entertainment unit that featured videos shot on its action cameras.
Nick Woodman, the founder, and CEO of GoPro created the company in late 2014 that was valued at $11 billion at that time. GoPro stock has plummeted since then, driven down by both an outlandish valuation and a fall in sales that has plunged the company down and deep. This year, GoPro has suffered a net loss in each of the four quarters, and it is expected to lose more finances on a Generally Accepted Accounting Principles (GAAP) basis in 2017. The company is now valued at only $1.25 billion.
The company faces stiff competition from both direct competitors and smartphones. Moreover, phones providing water resistant cameras are further diminishing market scope for GoPro. Competitors like Sony, Xiaomi, and Polaroid have similar products like the GoPro Hero.
GoPro’s recall of its Karma drones due to power failure issues came as a huge blow to the company as investors were worried about company’s falling revenues and goodwill. The drone market is also highly competitive and is currently dominated by China’s DJI and France’s Parrot.
The company even got energy drink maker Red Bull, a big sponsor of extreme sports, to invest in the company and it also set up a channel on Microsoft's Xbox Live. But nothing has helped as its value has fallen by 90% from nearly $100 a share to a mere $8.60 per share in the past 2 years.