GoPro Plummets After Recalling 2,500 Karma Drones
GoPro shares tumbled as much as 10 percent after the company said it’s recalling about 2,500 of its new Karma drones, dealing another blow to already dim prospects for the holiday season, according to Bloomberg. In a “very small number of cases” GoPro drones bought since Oct. 23 lost power, the company said in a statement. No injuries or property damage have been reported and owners can return the units for a full refund, GoPro said.
Chief Executive Officer Nick Woodman had been betting on the new drone to spark growth. But last week, the company lowered its forecast for full-year sales and missed estimates for revenue in the third quarter, suggesting the device, and the latest iteration of its cube-shaped camera, won’t be the consumer hits it was expecting. The recall may further depress sales. Several analysts downgraded their recommendations on the stock and some lowered forecasts for fourth-quarter sales.
“This is not only a surprise to us, but another ding on management’s credibility,” wrote Erinn Murphy, an analyst at Piper Jaffray & Co., in a note. “Not only were we surprised by the modest level of initial units sold, but we believe it is a possibility that Karma will not be available for the key holiday season.” GoPro said it’s working with the U.S. Consumer Product Safety Commission and the Federal Aviation Administration on the recall and plans to resume selling Karma drones as soon as it resolves the issues.
The drone recall comes on top of production issues with the Hero5 camera, which executives mentioned on a recent earnings call. “The two pillars of GoPro’s growth story are shaking,” Jitendra Waral, an analyst at Bloomberg Intelligence, said. “There were a lot of built-up expectations around the recovery of the company with drones, so this is not a good start.”