GoPro Captures Downgrade Ahead Of CES; Company Guides Lower, Cuts Workforce

GoPro Inc GPRO is reportedly looking to slash up to 300 jobs, mostly in its drone division. While this has yet to be confirmed, at least one notable analyst cautions investors to move to the sidelines.

The Analyst

Longbow Research's Joe Wittine downgraded GoPro's stock from Buy to Neutral.

The Thesis

After speaking with high level supply chain contacts that are familiar with GoPro's business, a negative pre-announcement from GoPro concerning its fourth quarter performance is expected, Wittine said in a note. Specifically, the conversations led the analyst to believe GoPro's holiday sales performance fell short of the company's plan. A $100 price cut benefited the HERO5 Black, but "not enough to save the quarter," according to Wittine. Inventory as of the end of 2017 isn't lean enough to generate a catalyst in the first quarter of 2018.

On the positive side, a new sub-$200 camera is slated for the second quarter and a revised KARMA outlook is expected in the bottom half of 2018.

Despite what appears to be a plethora of negative commentary, the case for owning GoPro's stock could be made " on the atypical product cycle and cost-outs driving upside to consensus," Wittine said.

Investors are cautioned to wait for the company's fourth quarter earnings report and first quarter 2018 guidance before. But ahead of GoPro's investor meeting at the CES event Tuesday, the analyst can't "recommend buying today with a straight face."

Price Action

Shares of GoPro were trading lower by more than 4.6 percent at $7.17 ahead of Monday's market open.

The stock was halted at 8:56 a.m. ET. Shortly after, the company reported preliminary Q4 sales of $340 million vs. $474 million estimates. The company also announced it will reduce its global workforce from 1,254 employees to fewer than 1,000.

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