Dear Mr. Berko: On your advice, I didn't buy stock in GoPro in 2015, when it was trading at $56. And about a year later, it fell to $8. But as it recovered and rose to $16, my stockbroker had me buy 1,000 shares. It immediately fell to $10. I sold it and took a 6-point loss. Now it's about $5, and he's advising me to buy another 1,000 shares. We both think it has finally hit the bottom. What do you think?
Also, what do you think of Southern Co., an electric utility that you recommended when it was trading very close to $50 a share last year?
- GL, Vancouver, Wash.
Dear GL: Woodman Labs, for nearly a decade, made mounted and wearable cameras and accessories that were initially called capture devices. In February 2014, the name was changed to GoPro. In late June of that year, JPMorgan Chase, Barclays and Citibank took GoPro (GPRO-$4.89) public at $24 a share. Within three months, tens of thousands of stupids, figuring that this was the next-best thing to a cure for nocturia, had run this stock to $96 a share! The hype was exciting, and American investors - the biggest saps for the newest, trendiest dumb toys, such as the Fitbit - were hooked. (Perhaps Fitbit and GoPro ought to merge.) This newfangled toy temporarily enjoyed the combined allure of the Hula-Hoop, the Pet Rock and the Tamagotchi. Initially, Americans, Samoans, Mongolians and Slovakians couldn't get enough GoPro products and accessories. So GPRO posted record revenues in 2014 ($1.4 billion) and record revenues again ($1.6 billion) in 2015.
But the success of the action camera did not happen in a vacuum. Certainly, competitors - e.g., Samsung, LG and Kodak - recognized that this could be a profitable market if their products were attractively priced. And they were. Samsung's Gear 360, LG's 360 Cam and Kodak's Pixpro 360 were munching on GPRO's sales. Then, in 2016, the fecal matter hit the rotary impeller; revenues crashed to $1.1 billion, and GPRO was forced to report an aching $419 million loss. These losses were helped by several unsuccessful product launches and cost overruns, a result of a large, unwieldy product portfolio. Management was forced to reduce its inventory of older versions of its mountable and wearable cameras by discounting its product. Even though revenues were 8 percent higher in 2017 than they were in 2016 and even though operating costs fell by 51 percent last year (management slashed its research and development and its sales and marketing budgets), GPRO reported a 2017 loss of $126 million. In the first week of November, the company's founder and CEO, Nick Woodman, sold all of his stock - 706,980 shares - at $9.22 a share. I'm sure he knows that GPRO expects to lose millions this year and that the severe cuts in R&D, as well as sales and marketing, may hurt the company's progress and delay any profits until 2021.
There are 14 brokerages that follow GPRO. Two of them have "buy" recommendations. Ten have "hold" recommendations. And two have "sell" recommendations. GPRO has 1,550 employees, no long-term debt, 145 million shares outstanding and $170 million in working capital. Though a 1,000-share purchase would be a rank speculation, there might be a few points' profit in the coming 18 months if speculators, hedge funds, traders and manipulators were to take short-term positions in the stock. Apple and Xiaomi (and some say Taco Bell) are reported to be interested in buying GoPro.
Southern Co. (SO-$46) is one of the largest utilities in the nation, with 2017 revenues of $22.6 billion and a $2.38 dividend that yields 5.1 percent. And management has increased that dividend for nearly 25 consecutive years. There are 17 analysts who cover the stock. Six have "buy" recommendations. Ten recommend a hold. And two say to sell. It's a good income stock, and dividend increases should compare favorably with inflation. With 4.6 million electricity customers and 4.5 million gas customers in Georgia, Alabama, Mississippi and Florida, SO has modest long-term appeal and is a good income stock.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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Published: Tue, May 08, 2018
