GoPro is facing class action suits from shareholders who feel misled by the action-camera company's claims about the demand and the sales potential for its new Karma drones. Three law firms announced the legal action after GoPro recalled about 2,500 drones on Nov. 8 after discovering that they can lose power during operation in a “very small” number of cases. No related injuries or property damage have been reported, GoPro added.

The drones carried a unit price of $799. GoPro said it would refund the purchases to the customers who bought them after they were released on Oct. 23. No new drones will be sold until the issue is resolved.

Meanwhile, GoPro's downward spiral continued in the third quarter ended Sept. 30, with sales for the three months ended Sept. 30 plummeting by 39.0 percent from the year-ago quarter, down to $240.6 million.

Revenues for the action-camera company fell across every region: North America, Asia-Pacific and Europe. The management blamed this performance on production problems for the new Hero5 line of cameras and Karma, GoPro's entry into the drone market. Despite these problems, the management stressed that GoPro still held three of the top five positions in the camera/camcorder category in the U.S.

In Europe, according to GfK, GoPro's share of the digital imaging market in terms of units increased year-over-year by 2.0 percentage points to 11.0 percent in the third quarter. Shipments of the Hero4 Silver camera increased by nearly 14.0 percent sequentially and GoPro accounted for four of the top five camcorders in Europe on a unit basis in the third quarter. In Japan, GfK reports that GoPro's unit sell-through was up sequentially by 67.0 percent and by 125.0 percent year-over-year in the same quarter.

Despite these highlights, the company saw its gross margin fall by 6.2 percentage points to 40.6 percent in the quarter. It posted a net loss of $83.4 million for the period, versus a profit of $36.6 million a year ago.

Before the Karma recall, GoPro said it expected to return to profitability in 2017 thanks to new product launches and the development of the digital side of its business. In terms of software, it introduced GoPro Plus, a cloud-based content management solution that connects to Hero5 cameras and Quik, its mobile and desktop editing suite.

For the current financial year, GoPro said it anticipated sales in a range between $1,250 million and $1,350 million, down from $1,620 million in 2015. Revenues would grow at a double-digit rate next year, the management claimed.