GoPro Plunges on Bleak Holiday Forecast, Production Issues

(Bloomberg) -- GoPro Inc. followed Fitbit Inc. in saying it expects a lousy holiday season, leaving investors wondering whether creators of consumer fads like action cameras and fitness trackers can mature into lasting companies.

GoPro, known for its cube-shaped cameras, lowered its forecast for full-year sales and missed analysts' estimates for revenue in the third quarter. The shares fell 16.5 percent to $9.96 at 9:34 a.m. Friday after the results the night before, echoing Fitbit, a maker of wearable gadgets, which lost a third of its value after reducing its holiday forecast late Wednesday.

GoPro blamed the poor results on production problems for its new Hero5 camera and highly anticipated Karma drone. Similarly, Fitbit said that it suffered from complications in the manufacturing process for its slimmer Flex 2 fitness device. Still, the bigger question is whether the novelty of their devices has peaked. Once darlings of Wall Street, Fitbit and GoPro are young hardware companies that have fallen short of their promise.

“Most consumers do not see the need to have a dedicated video/photo capturing device, and stick to their smartphones,” Jerry Liu, an analyst at Morgan Stanley, wrote in an e-mail before GoPro's earnings were announced. “While the Hero5 is an improvement over its predecessors and Karma is a good first-generation product for the drone market, feedback has been at best mixed.”

For a wrap of analyst views on GoPro, click here.

GoPro Chief Executive Officer Nick Woodman has been banking on the latest iteration of the Hero camera line and the Karma drone to spark growth. But GoPro's lower projections for sales suggest the devices may not be the hit with consumers the company anticipated. GoPro lowered its full-year revenue forecast to $1.25 billion to $1.3 billion from an earlier projection of as much as $1.5 billion. The company needs to generate enthusiasm for its products to convince skeptical investors it can reach consumers outside its core fan base of outdoor adventure enthusiasts.

“Unfortunately we experienced production issues that resulted in lower than expected launch volumes for Hero5 Black and Karma,” Woodman said Thursday on a conference call. “We anticipate difficultly catching up to meet forecasted demand during the fourth quarter.”

GoPro faces intense competition in its markets. Though the company sees itself as the epicenter of filming experiences and sharing them on social media, newer entrants like Snap Inc.'s camera glasses are promising a seamless process from capturing to posting. In drones, GoPro is up against the dominant player, Chinese manufacturer SZ DJI Technology Co., and other upstarts flooding the market with cheaper models.

To make matters worse, GoPro's Karma has already experienced early headwinds. The shipping date was pushed back from October to November and analysts have said the device has received up and down reviews.

To contact the reporter on this story: Selina Wang in Hong Kong at swang533@bloomberg.net. To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Robin Ajello, Nate Lanxon