GoPro Shares Soar As Cuts Bring Profit Goal Nearer

GoPro shares increased more than anytime in close to a year following the unveiling by the maker of action cameras of another round of job cuts that will get the company closer to its elusive goal of turning a profit.

Shares were up over 13% Thursday afternoon after surging earlier in the day by as much as 18%. The company announced late Wednesday that it was cutting another 270 full time as well as open positions.

Last November, the company slashed 15% of its overall workforce and shuttered the entertainment division. As of December 31, 2016, GoPro employed over 1,550 employees.

Stabilization in revenue and another round of layoffs means that GoPro will likely become profitable in 2017 rather than 2019, lowering chances it would need to tap into a credit facility, said an analyst from Citigroup.

That news will likely keep away any bears for the next few quarters, added the analyst after raising his rating of the stock from sell to neutral.

Another Wall Street analyst said that the announcements by GoPro were likely aimed at the short sellers or at investors who have bet against the camera maker.

Cost cuts are able to preserve a substantial amount of cash than what had been expected previously but they raise questions about the ability of GoPro to create compelling products to introduce into the marketplace to drive sales, he added.

The number of shares of GoPro being sold and borrowed by short sellers equals over 36% of the stock that is publicly traded. When shares increase, short sellers will often buy stock back to limit losses, accentuating that move.

GoPro was once a high-flying maker of gadgets and action cameras with great digital media potential, but became a bloated business being undercut by Asian rivals that offered less expensive alternatives.

It posted disappointing earnings for its last quarter, had to recall its drone Karma last November and was hit by delays in production that hurt sales. COO C.J. Prober vowed to maintain costs in line, make cameras from the company easier to use and boost international growth.

Job cuts took place across the company, said Prober. The company was eliminating distractions such as its entertainment unit and tightening up its team structures, added the COO.

The video production unit at GoPro shrank to put more focus on content that was user-generated and less videos made by GoPro.

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