This past week, shares of high-tech camera maker GoPro Inc. (NASDAQ:GPRO) dropped more than 24% on a number of key pieces of news, all of which were taken by investors and analysts negatively.
On Monday, GoPro announced that it was revising its Q4 estimates downward, was cutting its workforce, and exiting the drone business, a segment which was seen as a key growth area for the company. With issues pertaining to market size and potential market saturation, highlighted in research reports from analysts covering GoPro on Tuesday, investors have taken the view that the long-term outlook for GoPro is perhaps not as bright as once thought.
As a growth company, investors are buying shares betting on long-term profitability growth, and with a forward price to earnings (P/E) multiple of more than 150 and negative earnings currently,
A number of analysts have now downgraded GoPro’s stock significantly, with target prices now coming in the $4-$6 range, lower than Thursday’s close.
With growth stocks all the rage these days, GoPro may just be one of the only stocks growth investors should steer clear of. I remain bearish on the sector overall, and this recent news from GoPro indicates to me that significant downside remains, despite the aforementioned weekly drop.
Fundamentally, other far better growth options are available on the NASDAQ – I would stick with companies such as Apple Inc. (NASDAQ:AAPL) or Alphabet Inc. (NASDAQ:GOOG) which stand out as mature value plays in contrast to the younger, higher risk companies such as GoPro.
Invest wisely, my friends.
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