On Sept. 9, I wrote the following about GoPro Inc (NASDAQ:GPRO): “Having been beaten to a pulp over the last two years, there’s very little downside risk in GPRO, assuming the new products aren’t a complete flop.” That assumption regarding GoPro stock was too kind.
It’s still early, but so far the aforementioned products — the GoPro Karma and the Hero 5 — have decidedly flopped.
The Karma, GoPro’s first-ever drone, which allows consumers to take overhead videos and photos from just about anywhere, has already had 2,500 units recalled due to a number of them losing power during use. Meanwhile, production of the Hero 5, its newest live-action camera, stalled and the company is unsure if it will be able to meet demand in the next two quarters.
That’s not how you want one product launch to go, much less two.
GPRO Stock Dragged Down by Recall, Bad Quarter
Not surprisingly, GPRO stock has taken it on the chin of late. After getting a nice bounce after the Karma and Hero 5 were unveiled in mid-September — GoPro stock jumped from $12 to as high as $17 later in the month — the bad publicity from the recall, the Hero 5 production shortage and a very weak third-quarter earnings report have knocked the stock back to its lowest point since June.
Now, having backed GPRO as a long-term buy three months ago, I could continue to blindly cheer-lead the stock and tell you all is well. But the fact is the Karma and Hero 5 have been a disaster. The Hero 5 production issues are solvable, though not good for GoPro’s deteriorating image. Plus, the latest live-action camera — similar to the latest Apple Inc. (NASDAQ:AAPL) iPhone — is not what’s going to turn GPRO stock around, unless sales are through the roof.
Karma is GoPro’s future. It’s the company’s first foray into something other than a camera — a small, silent, maneuverable drone created for the purpose of competing with DJI’s Phantom 4 drone and Parrot’s Bebop drone. Needless to say, it’s not off to the most auspicious start. Recalls are humiliating and lose money for any company, but it’s really not a good sign when they happen right out of the gates. Fair or not, it gives the impression that GoPro wasn’t ready to create anything other than a live-action camera.
The Karma recall could be an aberration, early growing pains for what could ultimately be the game-changing product many had proclaimed it to be. But at this point, it’s hard to trust GoPro. Until the company proves it can make and sell something other than a live-action camera, investors may stay away.