Bear of the Day: GoPro (GPRO)

GoPro (GPRO) was once one of the most recognizable growth brands in consumer electronics, but the business has been in structural decline for years. Despite repeated attempts to diversify beyond its core action-camera franchise, revenue continues to contract, camera volumes are falling and profitability remains elusive.

The latest results offered little evidence that the trend is reversing. Second quarter revenue fell 31% year over year to $105 million, while camera sell-through (Sell-through measures the percentage of inventory a retailer sells compared to the total stock shipped to them by the manufacturer) declined 38% to approximately 291,000 units. GoPro posted a $51 million GAAP net loss, compared with a $16 million loss a year earlier, while adjusted EBITDA deteriorated to negative $29 million.

Those numbers follow a difficult 2025, when full-year revenue declined 19% and camera sell-through dropped 20%. Subscription revenue has provided some stability, but it has not been nearly large enough to offset deterioration in the core hardware business.

More concerning is how GoPro is financing itself while attempting another turnaround.

Earlier this year, the company entered into an agreement with Yorkville for as much as $50 million of convertible debt, explicitly creating the potential for dilution as those securities are converted into common stock.

Then in July, founder and CEO Nicholas Woodman provided another $20 million through senior secured notes accompanied by warrants to purchase roughly 25.7 million shares of Class B stock. GoPro also amended its revolving credit facility, including increased borrowing costs and lender waivers.

Woodman's willingness to provide capital certainly demonstrates confidence in the company he founded. But from an investor's perspective, the broader financing picture is difficult to ignore. When a shrinking business is funding continued losses with secured debt, convertible securities and warrants, existing shareholders face both balance-sheet risk and potential dilution.

GoPro's board has also initiated a review of strategic alternatives, another indication that the company recognizes the need for a more significant change in direction.

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GoPro Earnings Estimates Collapse

The deteriorating fundamental picture is showing up clearly in analyst expectations. GoPro currently carries a Zacks Rank #5 (Strong Sell), reflecting a dramatic downward shift in earnings estimates.

Over the last 60 days, the analyst covering GPRO has meaningfully lowered forecasts. The current quarter estimate has fallen from a profit of $0.01 per share to a loss of $0.14. Next quarter estimates have moved from positive $0.05 to a $0.02 loss. The full year estimate has collapsed from positive $0.05 to a loss of $0.72 per share and next year estimates have moved from positive $0.05 to a $0.01 loss.

The consensus outlook has moved from modest profitability to substantial losses in a very short period.

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The revisions also follow another disappointing earnings report. In Q2, GoPro generated $105 million in revenue, down from $153 million a year earlier, while adjusted EBITDA swung from a $6 million loss to a $29 million loss.

The company is finding some success in subscriptions, where revenue increased 11% and subscriber attach rates reached a record 69%. But that remains a relatively small bright spot within a much larger business experiencing severe volume declines.

For the stock to recover sustainably, GoPro needs more than cost cutting or incremental subscription growth. It ultimately needs to demonstrate that it can stabilize the top line and build a profitable business around its brand. So far, the numbers are moving in the opposite direction.

Should Investors Avoid GPRO Stock?

At less than $1 per share, GoPro may look tempting as a turnaround or acquisition speculation. The company still owns a globally recognized brand, continues to develop new products and is actively reviewing strategic alternatives.

However, those potential catalysts need to be weighed against a very difficult financial reality.

Revenue and unit sales continue to decline, losses are widening and earnings expectations are moving sharply lower. At the same time, the company has increasingly relied on secured debt, convertible financing and warrants to maintain liquidity, creating additional risk for existing shareholders.

A strategic transaction could change the story, and GoPro's brand may ultimately have value to another company. But betting on an acquisition is very different from investing in a healthy underlying business.

Until there is clear evidence that sales have stabilized and the company can generate sustainable positive cash flow without continued reliance on potentially dilutive financing, GoPro remains a difficult stock to own.

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This article originally published on Zacks Investment Research (zacks.com).

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