Why GoPro, Inc. Stock Plummeted in January

What happened

Action-camera company GoPro (NASDAQ: GPRO) shocked investors in January when it announced it was laying off hundreds of workers and exiting the drone market.

Announced alongside worse-than-expected preliminary fourth-quarter results, GoPro's update on its business sent shares spiraling downward. In total, GoPro stock fell 27.7% in January, according to data provided by S&P Global Market Intelligence.

So what

On Jan. 8, GoPro reported preliminary fourth-quarter revenue of $340 million, including an $80 million impact from its recent price reductions on its products. This is down sharply from fourth-quarter revenue of $541 million in the year-ago quarter.

GoPro also, surprisingly, said that even though its late-2016-launched Karma drone was number two in market share amid similarly priced drones during 2017, "margin challenges in an extremely competitive aerial market" prompted the company to exit the drone market.

In conjunction with this change, GoPro said it was reducing its global workforce from over 1,250 employees to under 1,000.

Now what

GoPro CEO Nicholas Woodman said the company is committed to turning around its business in 2018, guiding to return to profitability and growth in the second half of 2018. Woodman cited strong sell-through at lower prices and optimism for GoPro's hardware and software roadmap as expected catalysts during the year.

Amid these challenges, Woodman is reducing his cash compensation for 2018 to $1.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends GoPro. The Motley Fool has a disclosure policy.