Is GoPro's Q1 Performance a Turning Point for Value Investors?

Rhys NorthwoodMonday, May 12, 2025 7:48 pm ET
63min read

GoPro’s Q1 2025 earnings report presents a paradox: the company beat revenue and earnings estimates while simultaneously reporting its fourth consecutive quarterly revenue decline. This juxtaposition raises a critical question for investors: Is the $0.58 post-earnings dip a buying opportunity for value investors, or does it mask an overvalued bet on a fading hardware giant? Let’s dissect the data to uncover the truth.

The Financial Paradox: Beating Estimates in a Declining Market

GoPro reported Q1 revenue of $134.3 million, a 13.6% year-over-year drop, yet it beat Wall Street’s $125 million estimate by 7.4%. Similarly, its loss of $0.12 per share narrowly topped expectations of a $0.13 loss. This “beat the street” mentality has become a pattern, with

now outperforming EPS estimates for the fourth straight quarter.

But beneath the surface lies a stark reality: retail revenue fell 12% year-over-year, and camera unit sales plummeted 18% to 440,000 units. The decline was particularly acute in Asia, where revenue dropped 54%—a region once critical to GoPro’s growth. .

The Silver Lining: Cost Discipline and Subscription Resilience

The bright spots in GoPro’s report are undeniable. Operating expenses fell 26% year-over-year, driven by cuts to R&D and marketing. Adjusted EBITDA improved by 46%, narrowing the loss to $16 million, while subscription revenue grew 4% to $27 million. Notably, average revenue per user (ARPU) rose 5%, signaling stronger retention in its service business—a critical lifeline in a hardware-driven market.

These metrics highlight a strategic shift: GoPro is no longer just a camera company. It’s now a hybrid hardware-software business, leveraging its ecosystem of cameras, software upgrades, and content services. The $27 million in recurring revenue (despite a 1% dip in subscribers) suggests a more stable income stream, even as hardware sales falter.

Valuation: Is $0.58 a Bargain or a Mirage?

At its current price of $0.58, GoPro’s market cap hovers near $95 million, a fraction of its peak valuation of $5.1 billion in 2014. The stock has fallen 43.6% year-to-date, underperforming the S&P 500’s -3.8% decline. This collapse has sparked debates over whether the stock is deeply undervalued or overly optimistic about a turnaround.

Let’s analyze the math:
- Revenue multiples: At $0.58, GoPro trades at a P/S ratio of 0.13x (based on 2024 revenue of $721.55 million). For comparison, GoPro’s historical average P/S ratio is 1.5x.
- Forward metrics: Analysts project a loss of $0.06 per share for 2025, but even assuming breakeven by 2026, the stock’s valuation is aggressively discounted.
- Zacks Fair Value Analysis: Third-party analyses, including InvestingPro’s, suggest the stock is undervalued by 50-70% compared to its “fair value” of $1.20-$1.50.

The case for value hinges on two factors:
1. Cost discipline and margin expansion: GoPro’s operating expenses are now $62 million annually, down from $84 million in 2024. If it can sustain this while growing subscriptions and launching new hardware, profitability could return sooner than expected.
2. New product pipeline: The Max Two 360 camera (launching in 2025) and anamorphic lens mod for the HERO13 Black aim to attract professional content creators and enthusiasts. These products target niche markets with higher margins and brand loyalty.

The Risks: Hardware Decline and Industry Headwinds

The bear case is equally compelling:
- Hardware secular decline: The action camera market is saturated, with competitors like DJI and smartphone manufacturers eroding demand. GoPro’s 18% drop in unit sales hints at irreversible consumer preference shifts.
- Asia-Pacific woes: The region’s 54% revenue collapse reflects both macroeconomic slowdowns and local competition. Reversing this trend will require aggressive pricing or localization strategies, neither of which is guaranteed.
- Industry underperformance: The Zacks Audio Video Production sector ranks in the bottom 29% of all industries, historically underperforming top sectors by a 2:1 margin. This drag could outweigh GoPro’s individual strengths.

The Bottom Line: A High-Reward, High-Risk Bet

GoPro’s stock is a classic value trap vs. turnaround story. On one hand, its beaten-down valuation, cost cuts, and subscription resilience offer a compelling entry point. The $0.58 price reflects deep pessimism about its future—a sentiment that could reverse if the Max Two 360 and other innovations reignite growth.

On the other hand, the company faces existential risks: declining hardware demand, execution risks on new products, and a struggling industry. A single misstep—say, weak sales of the Max Two or further margin contraction—could send the stock spiraling again.

Investment Decision: Go All-In or Pass?

For aggressive value investors, GoPro’s $0.58 price offers asymmetric risk-reward:
- Upside: If GoPro stabilizes hardware sales, grows subscriptions to $40 million annually, and achieves breakeven by 2026, the stock could triple to $1.70.
- Downside: If hardware sales continue collapsing and the new products flop, the stock could approach $0.20.

The shows a clear disconnect between its valuation and fundamentals. For now, the bet is on management’s ability to execute on its “cost discipline + software-driven growth” strategy.

Final Call: Buy, but Stay Vigilant

While GoPro’s Q1 results are far from perfect, they signal a strategic pivot that could redefine its future. The $0.58 price is a high-risk, high-reward opportunity for investors willing to bet on execution. However, this is no “set it and forget it” play—monitor the Max Two 360’s launch, Asian market recovery, and Q2 2025 results closely. For now, the data suggests the stock is priced for failure, but the path to success is narrowing.

Action Item: Allocate 5% of your speculative portfolio to GoPro, with a stop-loss at $0.45 and a target of $1.20. The clock is ticking—will this be a turning point or a final stumble?