Goldman Sachs became the second company in just two days to downgrade the rating of GoPro Inc. to sell with a result that the shares of Go Pro fell to its lowest intraday price since 2014 June. Before Goldman Sachs, it was Citigroup Global Markets that has given a sell recommendation with a price target of $8. Its analyst Stanley Kovler has described the company as the “best house in a deteriorating neighbourhood.”
Goldman Sachs specified that the market for the camera maker is too crowded and it will be difficult for the company to do well. The analyst at Goldman Sachs, Simona Jankowski wrote, “We think GoPro’s main challenge is that its core action market is largely saturated, as it has not attracted a significantly broader and more mainstream audience. We expect GoPro to continue to struggle fundamentally.”
These two ‘sell’ recommendations by two reputed firms led to shares losing as much as 10% in intraday trading with the lowest price touching $7.95.
Early last month, GoPro gave another round of disappointing earnings and the forecasts were also gloomy. The company had to recall its much-hyped Karma drone just two months after the launch and its new Hero5 camera also had to be withdrawn. There were production delays and this led to lower sales. These problems of delay in product rollout in the holiday season and the flop show in the drone market were taken seriously by the market analysts, which then recommended the ‘sell’ for the company shares.
Jankowski anticipates that the company will have negative cash flow in this year, which can prompt it to tap its credit facility. Citi Research also indicates that for the next two years the company is more likely to lose money and thus keeping its shares will prove to be a major disappointment for the investors.
In the last six months when the markets on an average are doing really good, especially after November 8th, the company shares have fallen by nearly 40%. Dow Jones is at all-time high and S&P 500 has gained more than 8% in the past few months. GoPro after being listed at $24 in June 2014 hit a peak of $98 in late 2014, but on Monday it went to a low of $7.95 in intraday.
For the analysts to take a positive view on it, the company needs to work on various fronts, including the product development and launches.