GoPro Inc (GPRO) stock has been a nightmare for the many investors that had high hopes for the action camera maker following an impressive initial public offering.
How bad has it been? GoPro’s stock peaked at $93.85 back in October 2014 and then plunged to a single-digit price in February of this year.
Investors were dealt blow after blow, ranging from earnings misses, downward revised guidance, an absence of new and innovative products and cautious commentary from key members of its supply chain.
GoPro has essentially erased its once coveted title of Wall Street’s darling and is now loathed by Wall Street.
GoPro stock is currently trading for roughly half of its $24 IPO price and there is no better time to buy GoPro stock than now – especially after management recently eliminated a major bearish thesis.
GoPro Stock: Editing Software No Longer a “Headache”
Andrew Uerkwitz, an analyst at Oppenheimer, slammed GoPro stock back in July 2015 when he detailed a frustrating experience with a GoPro camera.
Uerkwitz attempted to duplicate a YouTube video depicting a father taking his son out for a leisurely bike ride for some ice cream. The analyst noted that his experience was too “time-consuming and complicated” in addition to being “impractical for parents of children.”
Uerkwitz concluded that GoPro’s cameras will only be enjoyed by “prosumers” and the average consumer would find the GoPro experience “generally cumbersome.”
Investors quickly caught on that GoPro’s hardware-focused technology does indeed come with a headache of an editing experience. Sales subsequently were hit hard, along with GoPro’s stock.
So what’s changed?
GoPro announced on Feb. 29 that it acquired two leading mobile editing apps, Splice and Replay.
Prior to GoPro’s acquisition, Splice was described as being a “godsend for music producers,” while Apple Inc. (AAPL) offered what could be seen as a seal of approval by inviting Replay’s management to showcase the app during a press conference.
GoPro’s success hinges on the consumer’s ability to share videos with ease from their mobile device. Its acquisitions solve this major problem, creating the ultimate video-capturing and sharing experience.
It is reasonable to assume that the now improved user experience can translate to improved adoption of GoPro’s cameras and improved sales over the longer term.
While it would be naive to think that all of GoPro’s troubles were eliminated overnight following the acquisition, it would also be naive for investors to continue evaluating GoPro’s stock under Uerkwitz’s expired bear thesis.
But Wait, There’s More
GoPro announced back in May 2015 that it is developing its own drone line which will be available for sale in 2016. Management reiterated during its fourth-quarter conference call that the drone, named Karma, will “be on store shelves in the first half of 2016.”
Despite GoPro’s stock plunging throughout 2015, the company deserves credit for dominating market shares. Management boasted during its Q4 conference call that it holds an 85% market share within the action-camera category.
GoPro could leverage its dominant market position to become successful in the consumer drone market. In fact, consumers already associate GoPro’s cameras with drones, as its Hero camera can be equipped onto drones manufactured by 3D Robotics.
GoPro’s entry into the drone market couldn’t come at a better time. The market is still in its infancy, and consultancy firm Teal Group predicted in 2015 that the current $4 billion unmanned aerial vehicle market will grow to a $14 billion market over the next 10 years, with peak sales totaling $93 billion.
Management appears to be fully convinced it is ready to roll out a winner in drones and consumers will embrace its new product. Here is what GoPro CEO Nicholas Woodman said during the company’s Q4 conference call:
“And so even though GoPro has not had a drone product per say, our brand is known as a drone company ironically and I think that the consumers that are currently buying drones are anticipating for what GoPro is going to do in the category. And so when you combine that with our global distribution, our in-store merchandizing the fact that our brand is already known as a contributor to the drone movement and our history of delivering extremely versatile and durable and capable capture solutions for consumers, I think that many people are giving us the benefit of the doubt that’s going to help us with product launch.”
Finally, GoPro’s management also hinted during its conference call that it is actively investing in virtual reality. Specifically, the company has “several products in development that will position GoPro as a leader in VR.”
Bottom Line on GPRO
One of the largest complaints surrounding GoPro stock and the company’s business model is its lack of speed and urgency in addressing its clients wants and desires. The company has been slow to innovate existing products, slow to improve its software platform and, more importantly, slow to introduce new products to the market. This is all changing — and fast.
GoPro stock came crashing down on Feb. 3 as management guided its first quarter and full year 2016 results noticeably below Wall Street’s expectations.
Naturally, a lower than expected performance translates to a lower stock price, giving GoPro stock investors an opportunity to double down on its investment and give newcomers to GPRO an opportunity to buy at low prices.
GoPro could be in the best position it has ever been to grow sales over the long term, and GoPro stock now faces a reset of Wall Street expectations.
This represents the opportunity that investors have been anticipating for years, but never found the right time to pull the trigger on GoPro stock.
As of this writing, Jayson Derrick did not hold a position in any of the aforementioned securities.
