What's going on?

GoPro�s shares dropped by about 20% after the once-prolific camera maker said it snapped significantly less revenue in its latest quarter than investors expected. The stock is now down over 90% since its 2014 peak � now that�s a wipeout!

What does this mean?

Part of the problem stems from soft demand for GoPro�s flagship Hero line of cameras. GoPro took the plunge and chose to substantially cut the Hero�s price in order to boost sales over the crucial holiday season. Partly due to the Hero failing in its quest, GoPro is now laying off almost 20% of its workforce as part of a cost-cutting plan that seeks to return the company to profitability by the second half of 2018. It�s also abandoning its agonizingly shiny new drone business, shuttering the Karma drone-cam sideline.

Why should I care?

For markets: GoPro is more of a cautionary tale than a big impact on markets overall.

The GoPro story is a reminder that owning shares of one individual company is risky (relative to owning a bunch of different stocks, a.k.a. diversifying). This is especially true with relatively new companies with sales concentrated in a single hot product. In the time it took for GoPro to lose more than 90% of its value, US stocks as a whole have risen about 50%. (tweet this)


The bigger picture: The drone market is fiercely competitive.

GoPro�s retreat from the drone market is undoubtedly somewhat to do with its desire to cut costs, but the company also cited huge pressure on profitability: competition in the industry is pushing down manufacturers� profit margins. Meanwhile, in GoPro�s view, increasingly strict regulations (like mandatory drone licenses) in Europe and the US will likely reduce the total size of the available market. It�s a sign that, despite expectations of the market taking off, succeeding in the competitive and highly regulated drone game will be tough.