We’ve long argued that GoPro (GRPO) is on course to become the next BlackBerry (BBRY) and it might be getting there faster than anyone thought.
GPRO slapped a surprise 25% price cut on the HERO4 Session camera and failed to launch a new marquee product for the holiday selling season.
Yup, this is how it begins.
A company never wants to cut prices. It kills margins, which is another word for profitability. The only reason GoPro would slash prices is to move a product that’s not selling as well as hoped. Like every company on the planet, GPRO has got to move the inventory.
As troubling as lackluster sales for a camera launched less than three months ago may be, it isn’t a crushing blow. Just don’t be surprised if this is the first in a series of setbacks to come.
More worrisome, GRPO didn’t revamp the high-end of its product line to take advantage of holiday sales. There’s a reason why Apple (AAPL) likes to debut new iPhones in the fall.
As dim as the long-term prognosis is, GoPro stock has momentum right now. It’s still the top brand in action cameras — a product category it single-handedly created.
And yet it’s taking its foot off the gas. Whatever that means, it ain’t good. Christmas comes but once a year. Who’s to say anyone will care what GPRO debuts next fall?
GoPro Stock May Be a Trade, but Nothing More
GoPro only has so much time to dominate the product category it created, because it has no competitive advantage. The company put existing technology together in an innovative way. It didn’t create anything that can’t be replicated or improved upon by the competition and then sold at lower prices.
It makes cameras.
As I noted recently, anytime a company has a hit like GoPro, established and brand-new companies alike form a wolf pack intent on eating their fills of market share.
Furthermore, being first to market is no guarantee of success either.
It’s pretty rare that the company that originates a new product category comes out on top. Google (GOOG, GOOGL) didn’t invent search, Facebook (FB) didn’t invent social networking and Apple didn’t invent MP3 players or smartphones.
Indeed, what’s to prevent Apple and the rest of the smartphone industry from subsuming yet another gadget? It’s obvious investors in GPRO are seriously spooked by such a scenario. Shares sell off every time Apple belches out a camera-related patent.
GoPro stock bounced off an all-time low after the market digested the price-cut news, but it’s still lost more than half its value over the last couple of months.
Let’s say for the sake of argument that the sell off in GoPro stock is overdone. The market usually overreacts on both the upside and down. In such a case, GoPro stock would be fine as a trade. If you like keeping close tabs on your positions, go for it.
As a long-term bet, GoPro stock is doomed. It’s a camera manufacturer. How is that business going to be worth substantially more in three to five years than it is today?
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
