The Next Best Step for GoPro Inc (GPRO) Is Software

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GoPro Inc (NASDAQ:GPRO) reports earnings on Aug. 3 and analysts are expecting more bad news for GPRO stock.

The Next Best Step for GoPro Inc (GPRO) Is Software

Source: DJI

The consensus is a loss of 25 cents per share, although optimists are hoping for a loss of 22 cents, on revenue of $270.75 million.

Both the Karma drone and Hero4 camera seem to be failures. CEO Nick Woodman is now seen as a one-hit wonder, the initial action camera a fad.

The opinions at InvestorPlace are unanimous. Laura Hoy calls the company too damaged to bother with. The new Fusion camera, due out later this year, won’t save the stock, writes Vince Martin. I have suggested the only real value here is in the brand.

But there is one more hope for GPRO stock — one more way Woodman can make some valuable lemonade out of all these lemons.

It’s time for GoPro to give up on hardware.

Should GoPro Go Into Software

All hardware eventually becomes software. Once a solution to a problem is found, it is gradually made into smaller-and-smaller packages — a system, a box, a board, a chip. The key to it all is the software.

GoPro has some nice software. QuikStories lets users edit their footage on-the-fly. GoPro bought the Quik app in 2016.

Software is where the money is. Extend software like Quik to use by other companies’ drones, build an operating system around camera and drone systems, and maybe the company has something worth selling, both to consumers and to another company.

The market cap is down to $1.15 billion, the company remains debt-free, and as previously noted the brand has credibility. GoPro could take its fans “up the stack” in editing, maybe even set itself up to be bought by an Adobe Systems Incorporated (NASDAQ:ADBE) as a bolt-on.

GPRO Stock: Hardware Is Dead

As far as hardware is concerned, forget it. GoPro is no longer considered a key vendor and the biggest American drone company, 3D Robotics, just partnered with China’s DJI, the market leader, which has vertical integration and a closed software system.

The story of 3DR is one that GPRO should be emulating. It saw itself getting beaten in consumer drones, switched to business drones, then focused on the applications, and is now an enterprise software company offering something the Chinese giant needs.

This has been the play for years. The iPhone isn’t made in America. Neither is the PC on your desk. Chinese assembly dominates the world, but U.S. software also dominates the world. Do what works.

The $800 Karma isn’t going to get up from its bad reviews. Customers who have bought the product are “raking the company over the coals”. It’s a failure.

No One Likes GoPro

There are still 17 analysts covering the stock, although once the market cap falls below $1 billion they are likely to scatter like sheep. Only one of these analysts says buy it, while five scream sell.

There were still institutions holding the stock on Mar. 31 although most were passive mutual funds. The biggest holders were Vanguard Group and Blackrock. Certainly they can make Woodman see sense.

GoPro was once the hope of the camera industry, but cameras devolved to chips long ago. Even GPRO itself was just an OEM for Ambarella Inc (NASDAQ:AMBA), and that stock is being taken down as well, its market cap down to $1.7 billion.

This happens more times than you would think. A promising company with a hit product runs into a dead end and twists slowly in the wind, or just fades away entirely. It’s sad, but that’s capitalism.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned no shares in companies mentioned in this article.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2017/08/gopro-inc-gpro-next-best-step-software/.

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