GoPro takes a nosedive

GoPro's CEO puts company's future in focus
GoPro's CEO puts company's future in focus

GoPro is taking its most extreme plunge yet.

The wearable camera maker's shares nosedived by 16% on Thursday to the lowest level since going public. GoPro (GPRO) stock is not only on track for its worst day ever, but now is hovering perilously close to its IPO price of $24.

The amazing GoPro story has come crashing into a harsh reality: The market for extreme sports enthusiasts who have the money for the amazing devices may just not be all that big.

GoPro's gravity-defying sales growth is coming back to earth too -- fast. Sales exploded by 72% in the second quarter, but slowed to 43% last quarter and now GoPro is warning sales will actually contract during the holiday season. Talk about an extreme reversal.

Related: GoPro has crashed. Will drones rescue it?

GoPro struggles to go beyond extreme sports

It's not that GoPro's cameras stink. By all accounts, they're fantastic devices. The problem is GoPro is struggling to expand beyond a niche market to mass appeal.

"GoPro investors think this thing is right in the sweet spot. It is. But the sweet spot isn't enough by itself. You need a broad market," said Roger Kay, a tech analyst who is president of Endpoint Technologies Associates.

Related: GoPro aims to become media company

GoPro dropped a bomb on investors late Wednesday when it reported earnings and sales that badly missed targets. Fears about GoPro's future were amplified by the company saying holiday sales will tumble.

GoPro burst onto Wall Street in June 2014 when it sold shares to a public growing increasingly fascinated by the gadget maker's brand. The stock skyrocketed, more than quadrupling in just four months.

But investors are quickly realizing the young, hip, athletic audience that GoPro appeals to isn't representative of the typical American consumer.

"Another problem: Most of the young, hip people are struggling -- and these products aren't cheap," Kay said.

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GoPros are getting cheaper

GoPros aren't cheap. But they are getting cheaper -- and that's alarming Wall Street. Piper Jaffray slapped a rare "underperform" rating on GoPro due in part due to disturbing pricing trends. GoPro's HERO4 Session is now fetching "only" $300 on Amazon (AMZN), down from $400 in mid-September, according to a PiperJaffray report titled "GoPro likely to GoLow(er)."

Erinn Murphy, a PiperJaffray analyst,, warned of several "red flags" that have emerged, including lofty levels of inventory, "moderating" consumer demand and a "severe reversal in sales."

Questions about GoPro's future are causing Wall Street to mark down the way the stock is valued. Instead of the fast-growing media and tech company GoPro aspires to become, investors are applying lower, more hardware-like multiples to the stock.

"As long as the category growth rate is difficult to discern, the P/E multiple is likely to contract quite a bit," said Cowen & Co. analyst Rob Stone. He downgraded GoPro to "market perform" and slashed his price target to $24 from $60.

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Can GoPro fly again?

None of this means GoPro can't return to flight eventually. The company has a series of ambitious efforts underway, including expanding into the rapidly-growing drone market, launching a new editing software platform and monetizing its awesome content of extreme sports activities. GoPro recently surpassed 1 billion views on its YouTube channel.

"You need all of that stuff to hit and spark up the growth rate again for the shares to get back," said Stone.

GoPro founder and CEO Nick Woodman insists he and his employees are far more focused on the long-term vision than the recent stock turbulence.

"Everybody within GoPro is very excited and determined...It makes it easy for us as a team to look past what the stock is doing today and focus more on where we are going to be in the next three to five years," Woodman recently told CNN.

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