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Why Is GoPro (GPRO) Stock Gaining Today?

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Shares of GoPro (GPRO - Free Report) were up about 5% in afternoon trading Thursday after a report said that Chinese tech giant Xiamoi Corp. has considered making a bid for the action camera manufacturer.

GoPro chief Nick Woodman recently said that he is open to a sale and earlier this year hired investment bank JPMorgan Chase (JPM - Free Report) to advise the company on a potential deal. A person familiar with the matter said that Xiaomi is interested in an offer but does not want to overpay, according to The Information.

GoPro shares bounced to an intraday high of $5.30 shortly after the story emerged. That move represented the stock’s biggest jump since February 14.

The report also suggested that GoPro could fetch up to $1 billion, mirroring the price Hewlett Packard paid for Palm, a similarly-struggling electronics maker, back in 2010. GoPro was once valued at more than $10 billion, but its market cap has since fallen to about $750 million.

While the popular action camera maker continues to pump out high-quality products, the proliferation of smartphone cameras and increasing competition in the outdoor camera market continue to hurt the company’s revenue stream. Analysts expect GoPro to witness net sales of $1.07 billion in 2018, down about 9% year over year.

Meanwhile, the firm has struggled to turn a profit, and debt issues now pose a serious threat to its chances of survival. In 2017, GoPro reported an adjusted loss of 69 cents per share, and our current consensus estimate is calling for the company to post a per-share loss of 42 cents in the current fiscal year.

It is also worth noting that GoPro’s earnings outlook has deteriorated significantly over time. Just 90 days ago, our consensus estimate for fiscal 2018 earnings was projecting a profit of 4 cents per share. In its most recent full quarter, GoPro reported a non-GAAP loss of 30 cents per share, dramatically missing the Zacks Consensus Estimate of a 10 cent loss.

GoPro investors will hope that further takeover speculation will rejuvenate the stock, which has lost more than 40% over the past year.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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