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Could There Be an Easy Explanation for GoPro Inc.'s Falling Sales?

Shares of GoPro Inc. have been slammed in 2015 as investors became disenchanted by a floundering growth story and a mismanaged launch of the Hero4 Session. There are a lot of negative narratives for the company this year, as some of my fellow Fools have correctly pointed out .

But one dynamic I don't see discussed much is how inventory could be playing a big role in GoPro's declining sales toward the end of this year. Now that the company is no longer in a buildout of its sales network, it's not rapidly building channel inventory that makes sales look better than they really are. Let me explain how this could be playing out at GoPro.

Data source: GoPro's earnings releases. Chart by author.

Could inventory be GoPro's problem in 2015?

GoPro's disappointing fourth-quarter guidance of $430 million to $445 million in revenue was what freaked out investors and slammed the company's shares over the past couple of months. But there could be an easy and logical explanation for some of the disappointment. The lack of new retailers with inventory to fill in 2015 may be a driver of that weak guidance.

I'm not saying this is the only reason GoPro's sales are going to be down in the fourth quarter, and this isn't to suggest it won't have challenges growing now that it's selling the Hero4 Session for $199. But understanding how inventory has helped drive sales growth over the past few years and why it may now be a drag on revenue, even if consumer demand is flat, is important for investors.

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The article Could There Be an Easy Explanation for GoPro Inc.'s Falling Sales? originally appeared on Fool.com.

Travis Hoium owns shares of GoPro. The Motley Fool owns shares of and recommends GoPro. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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