The stock price of GoPro declined by 20% in extended hours after the company said it would delay the shipments of its Hero8 Black and Max. The company had launched the products on Tuesday this week.
In a filing with the SEC, the company attributed the delay to a “late-stage production delay”, adding it also lowered its guidance for the year. It now expects revenues to be between $1.215 billion and $1.25 billion.
A Victim of Its Own Success
To starters, GoPro was once a leading company in the unicorn era. After its IPO, optimism among investors pushed the company’s stock to more than $14 billion. Investors believed the company could dominate the new space that it developed.
At the time, critics of GoPro were shunned by “savvy investors.” I know this well because as an early critic of the company. In 2017, I published an article where I compared GoPro with Garmin and advised investors to buy Garmin. One of the commenters said:
Brand name is priceless, I’m pretty sure everyone refers to action camera’s as Gopros not Garmin – I’m long GoPro based off 2 principles. Brand name, Humans need to document/share. Give it till 2020 they will be over 15b. Both companies may do good but with easier cloud storage this market is going to grow so much over the next 5 years.
Today, Garmin, which was then valued at $9.8 billion, is valued at more than $15 billion. GoPro, which was then valued at $1.13 billion, is valued at $790 million.
To a large extent, GoPro is a victim of its own success. The company created the action camera category and became a brand name. As the brand name grew, it attracted more competition from the likes of Garmin, DJI, and Ambarella.
Similarities With Peloton
As I wrote last week, I saw a lot of similarities between GoPro and Peloton. Striking a cautious tone, I argued that while Peloton had the first-mover advantage in the connected fitness industry, other well-funded startups could spoil its party. Like GoPro, Peloton is vulnerable because its fitness equipment is more expensive. Therefore, cheaper alternatives that will draw millions of users will likely come up.
I also mentioned the similarity between GoPro and Peloton on the strategy. GoPro describes itself as a media company, which it is not. It argues that its video subscription service also makes it a technology play. Peloton too describes itself as a technology and media company. Ultimately, a cheaper product will come up and disrupt the industry.
Nick Woodman Knows This
Surprisingly, Nick Woodman, who was once the highest-paid CEO, knows this. A quick glance at the company’s filings shows that Nick has been dumping his shares. This year alone, according to data from Morningstar, Nick has sold stock worth more than $42 million.
To be clear, it is not a wrong thing for a CEO to sell stock. They do it all the time. This is especially the case for Woodman, who is still the biggest individual owner of the company. The problem is that Nick and other executives are not buying. According to Morningstar, insiders have bought less than 700k shares this year. If these people believe in their company, we would expect them to be buying.