- GoPro stock has been very volatile in last few trades. The stock tanked 6.5%, a day after the latest product launch.
- The Karma drone and the Hero Session 5 camera have met most of the expectations and have got positive reviews so far.
- While the risks associated with the stock has definitely declined after the launch, they still persist.
In my previous article on GoPro, ahead of the Karma launch, I had said that GoPro stock is only for investors with a high-risk appetite and the last ten days of trading has shown us why. The stock has witnessed huge volatility. In the run up to the Karma launch, GoPro stock shot up around 18% in three trading days, but yesterday, the stock tanked around 6.5% with the near-term pressure on price persisting. This kind of volatility is not for every investor. There is too much risk with this stock. Tuesday's decline was partly because of profit booking, and partly because the new launches, while meeting the expectations, had nothing very extraordinary to give GoPro a strong competitive advantage.
The much hyped Karma drone met most of the expectations. The reviews have been good so far. The drone package comes with a Karma Grip handheld stabilizer, two batteries and a backpack. The drone weighs around 2.2 pounds and is very easy to fly. Karma comes with gamepad-style controller which has joy sticks for maneuvering. And unlike other controllers, the Karma controller comes with a 5 inch, sufficiently bright touch screen which is a big plus over its competitors. Karma drone can fly at 35 miles an hour and attain a maximum altitude of 14,500 feet. GoPro is also offering a "passenger app" which will allow others to view the live videos on their mobile and even control the camera positioning.
So how GoPro Karma compares with its competitors? The drone market is flooded with cheap drones with Chinese drone manufacturer DJI capturing the largest market share. Karma drone pack comes at $799 while Phantom 4 sells at $1199. Though Phantom 4 comes with a camera, GoPro did not include the camera as it felt that those who are planning to buy Karma may already have Hero Session 4 camera or are willing to buy Hero Session 5 camera.
Not including the camera compulsorily as a part of Karma is a good move. It makes the drone quite affordable for people already having the camera. However, there is also a Hero Session 5 camera pack at $1099 which is still competitive. The place where Karma loses over to its competitor is the "obstacle avoidance system" and "follow me" features which are present in the Phantom 4 and other drones. Karma's battery life of 20 minutes is in line with its competitors.
End To End Story-telling Solution
The real differentiator though was GoPro plus. It's a cloud storing package which can auto-upload the pictures and videos to the cloud and allows you to edit the videos later using GoPro's video editing suite at a monthly subscription of $4.99. With this move, GoPro has created a strong seamless ecosystem, becoming an end to end story-telling solution. It has also made sharing of photos and videos very easy. To quote GoPro CEO Woodman:
"With these new products, we're delivering on our promise to make it easy to capture and share engaging stories,". "HERO5's ability to auto-upload photos and videos to a GoPro Plus account dramatically simplifies mobile, on-the-go editing, sharing and enjoyment. This is a game-changing experience that we will continue to build upon."
Will GoPro Stock Soar With The Karma Launch?
If the initial reaction is anything to go buy, then not likely. While the products meet most of the expectations, there is nothing extraordinary which will hook the consumers. However, this still improves the outlook for the company and brings in a major product refresh (which is likely to drive sales). And the fact that the launch is leading into the holiday season will definitely help the next quarter sales numbers. The launch also reduces the bearish sentiments surrounding the stock to some extent. Goldman Sachs analyst Simona Jankowski while raising her price target from $12 to $14 (still below yesterday's close price) said:
"GoPro should be able to leverage its strong consumer brand name, significant retailer shelf space and global distribution footprint to gain share."
The other analysts who have raised price target include Piper Jaffray (from $6.5 to $9 with under weight rating) and Baird (increased its price target to 15 from 10, but remained at neutral). The consensus price target is around $12.25, a downside of 16%.
The near-term price pressure is likely to persist. With yesterday's fall, the stock breached the 20 day SMA and has next support level at 50 day and 200 day SMA. According to Schaeffer's Research:
"GPRO's weekly 9/30 15-strike put has garnered notable attention, and it appears as if some of the activity is of the buy-to-open kind. If this is the case, the goal is for the security to extend today's decline through next Friday's close, when the weekly options expire."
Possibility Of Short Squeeze?
There is a possibility of a short squeeze. More than 30 million shares, making up a third of GoPro's total float were sold short at the end of the previous month. With days to cover at around 4, a bullish rally may send shorts for cover leading to a short squeeze.
GoPro is scheduled to release its third-quarter earnings in the mid of October, and if the last earnings is anything to go by, the earnings are likely to be good. However, the Karma drones and Hero Session 5 camera will not impact the earnings as they will be available only next month.
Also Read: Analyzing The Bankruptcy Risk For GoPro Inc
The newly launched Karma drone and Hero Session 5 camera have not disappointed the market. And GoPro Plus is a clear differentiator. There has been a positive change in the sentiment surrounding GoPro stock, though there is still not much "actionable information". We will get a clear picture only after the products are made available. For now, GoPro stock still remains risky.