- GoPro's stock price has dropped by 53% in 3 months.
- The big action camera manufacturer is facing stiff competition.
- GoPro's CEO has expressed interest in the drone market and in content creation and ownership.
GoPro (NASDAQ:GPRO) is a giant in the action camera industry. Arguably, they opened the doorway for other manufacturers to follow. Their branding encapsulates youth, energy, and adventure. Consequently, they have been able to build a company with a market cap of $3.81 billion. However, interest in the stock has reduced- to put it lightly. GoPro's stock price has decreased by approximately 53% in the past three months. Although this might seem as if it is time for current investors to enthusiastically press the sell button, many are choosing to hold on for reasons that will be addressed later in this piece.
Why GoPro Stock Has Tanked
Why has GoPro's stock price decreased by so much in such a short time frame?
Someone looking at Go Pro's stock graph would think that something majorly calamitous has occurred. However, interest has waned due to two reasons:
- Sales of the Hero 4 session- their latest product- has been below expectations. This has caused GoPro to reduce the price from $399 to $299. Sales may have been affected due to the fact that their previous camera had more features. Go Pro marketed the 'Session' on the premise that it was 50% lighter and more compact. However, this wasn't a strong enough pull factor for consumers.
- GoPro decided not to refresh their camera for the critical Christmas holiday season. Investors were hoping that millions of action cameras would end up underneath the tree this holiday season.
Why GoPro Is A Long Term Bet
The aforementioned two factors are raising some flags. However, is the decline in GoPro shares overdone? I'm sure there are those that agree and those that don't. There is a sentiment that demand in action waterproof cameras is beginning to decrease. This is partly due to rapid improvements in smartphone camera technology and the number of more affordable 'copycats' that have flooded the market. However, it is worth noting that this could be a strategic move from GoPro's part; perhaps they could decide to release a game-changing range during Q2 of 2016?
To GoPro's credit they have a number of things which show that with increased innovation, they could be here for the long term, and are therefore a great long term play.
1. Net income has increased by approximately 276% in comparison to Q4 of 2014. This shows that the company is taking great strides in adding to their bottom-line.
2. GoPro has a debt of $0.00. This is fairly rare in the tech space and shows that they are building a healthy company. Arguably, some debt is good if it means that it allows them to conquer new frontiers and finance it appropriately.
The photography industry relies on being able to convince consumers to buy the next incremental upgrade. However, with Apple, Sony, and other smartphone makers continue to innovate. Plus, accessories allow consumers to transform any smartphone for use underwater.
Fortunately, GoPro has recognized this trend and is venturing into the camera drones market. Drones are the new exciting trend in cameras. It allows consumers to capture experiences in ways that would previously only have been possible via use of a crane or a helicopter.
A big player in this space is DJI and just to give you an idea of how big the camera drone market already is, they are predicted to generate in excess of a billion dollars in sales this year.
At Tech Crunch disrupt, Nicholas Goodman, CEO of GoPro, hinted at what we can expect as they battle to restore investor and consumer confidence. Nicholas Goodman briefly touched upon virtual reality and conveyed that it was an area GoPro is strongly pursuing. Interestingly, GoPro acquired virtual reality company Kolor in Q1 of 2015.
GoPro is well-placed to do something truly impressive with virtual reality. Due to their involvement with action sports events, they could revolutionize how events are captured, shared, and experienced. It is worth noting that Google and Microsoft are also interested in this area.
Additionally, GoPro's CEO strongly hinted at having an interest in media production- that is not just providing the technology to capture footage, but be pivotal in the creation of great content.
In conclusion. GoPro has some challenges which it has to address in order to restore investor confidence. However, they seem to be making innovative movements and thinking ahead of the competition. Plus, they recognize that owning original content is key to a strong brand, and its positive to see them venturing in this direction.
Q1 of 2016 would be vital for GoPro, and they need to release an astonishing line of products in order to cement their place in the industry. It also doesn't hurt that they have a strong financial position.