GoPro (GPRO)

Action camera company GoPro (NASDAQ:GPRO) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 13.6% year on year to $134.3 million. Its non-GAAP loss of $0.12 per share was in line with analysts’ consensus estimates.

Company Overview

Known for sponsoring extreme athletes, GoPro (NASDAQ:GPRO) is a camera company known for its POV videos and editing software.

Consumer electronics companies aim to address the evolving leisure and entertainment needs of consumers, who are increasingly familiar with technology in everyday life. Whether it’s speakers for the home or specialized cameras to document everything from a surfing session to a wedding reception, these businesses are trying to provide innovative, high-quality products that are both useful and cool to own. Adding to the degree of difficulty for these companies is technological change, where the latest smartphone could disintermediate a whole category of consumer electronics. Companies that successfully serve customers and innovate can enjoy high customer loyalty and pricing power, while those that struggle with these may go the way of the VHS tape.

GoPro's primary competitors include Sony (NYSE:SONY), Garmin (NASDAQ:GRMN), Canon (NYSE:CAJ), Nikon (OTC:NINOY), and private company DJI Technology.

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, GoPro’s demand was weak and its revenue declined by 6.1% per year. This was below our standards and is a sign of poor business quality.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. GoPro’s recent performance shows its demand remained suppressed as its revenue has declined by 13.9% annually over the last two years.

This quarter, GoPro’s revenue fell by 13.6% year on year to $134.3 million but beat Wall Street’s estimates by 7.3%.

Looking ahead, sell-side analysts expect revenue to decline by 7.4% over the next 12 months. Although this projection is better than its two-year trend, it's tough to feel optimistic about a company facing demand difficulties.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

GoPro’s operating margin has been trending down over the last 12 months and averaged negative 12.2% over the last two years. Unprofitable consumer discretionary companies with falling margins deserve extra scrutiny because they’re spending loads of money to stay relevant, an unsustainable practice.

This quarter, GoPro generated a negative 33.7% operating margin. The company's consistent lack of profits raise a flag.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

GoPro’s earnings losses deepened over the last five years as its EPS dropped 70.7% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. Consumer Discretionary companies are particularly exposed to this, and if the tide turns unexpectedly, GoPro’s low margin of safety could leave its stock price susceptible to large downswings.

In Q1, GoPro reported EPS at negative $0.12, up from negative $2.11 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast GoPro’s full-year EPS of negative $0.45 will reach break even.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Over the last two years, GoPro’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 8.7%, meaning it lit $8.74 of cash on fire for every $100 in revenue.

GoPro burned through $58.49 million of cash in Q1, equivalent to a negative 43.5% margin. The company’s cash burn slowed from $99.37 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

GoPro’s five-year average ROIC was negative 25.7%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, GoPro’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

GoPro burned through $88.3 million of cash over the last year, and its $146.2 million of debt exceeds the $69.63 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the GoPro’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of GoPro until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We enjoyed seeing GoPro beat analysts’ revenue and EBITDA expectations this quarter. Overall, we think this was a decent quarter with some key metrics above expectations. The market seemed to be hoping for more, and the stock traded down 4.4% to $0.58 immediately following the results.

Updated: July 9, 2025 at 10:25 PM EDT

When considering an investment in GoPro, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

GoPro falls short of our quality standards. To kick things off, its revenue has declined over the last five years, and analysts don’t see anything changing over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

GoPro’s P/E ratio based on the next 12 months is 12.1x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $0.50 on the company (compared to the current share price of $0.79).