GoPro Inc (NASDAQ:GPRO) stock got slammed on Tuesday after reports that Apple Inc. (NASDAQ:AAPL) was granted a patent for a GoPro-like wearable sports camera. GPRO fell as much as 14% in intraday trading on the news, as investors worried the patent could signify Apple’s intention to put out a device that competes directly with GoPro.
The website Patently Apple, which discusses and analyzes AAPL patents as well as discussing some industry news, brought the patent to the mainstream media’s attention with a sensationalist post entitled, “Apple Granted a Patent for a Superior GoPro-like Camera System.”
That headline is incredibly misleading. Yes, the patent in question was granted today by the United States Patent and Trademark Office, and yes, the abstract does mention GoPro twice by name. But that does not, as Patently Apple claims, mean that “Apple’s invention could directly move into GoPro’s territory.”
Dougherty & Co analyst Charles Anderson was spot-on when he addressed the panic surrounding the GPRO stock selloff as follows:
“For starters, we note that Apple patents many, many inventions and some small percentage tend to see the light of day as an actual product. More than anything, we see a scenario in which Apple will want to have a way for users to record from their iPhones and iPads remotely using the Apple Watch as a remote. This is a good patent for that.”
Anderson is exactly right. This patent is not, as GoPro’s plunging stock price would have you believe, intended as a GoPro-killer. This patent is for a way of interfacing between a camera and a battery-operated “remote control module.”
Considering the fact that the patent includes an image of what is clearly a battery-operated watch — this “remote control module” will probably end up being some version of Apple’s iWatch, as Anderson suggested. Additionally, the patent allows for the watch to be in low-power mode to conserve battery life until the watch is activated by the user.
AAPL Patent Isn’t What Should Worry GPRO Investors
News of this patent shaved off as much as 14% from the GPRO stock price. But consider the source of this initial market fear: Apple fanboys — Patently Apple‘s motto is “Celebrating Apple’s Spirit of Invention” — who wrote an attention-seeking, clicky headline the very day that the U.S. PTO granted the patent.
GPRO investors shouldn’t lose sleep over these ridiculous concerns.
That said, GoPro’s valuation is somewhat stretched. After going public in June of 2014 at $24 per share, GPRO stock quickly became the darling of Wall Street, quadrupling in less than four months to peak at nearly $100 per share.
A months-long correction started around the time that GoPro CEO Nick Woodman skirted the lockup period and dumped shares before the 180-day wait period. After taking advantage of the run-up in its stock price with a secondary offering at $75 per share (below its $85 pricetag at the time), and after today’s sensationalistic AAPL fears, GPRO stock still trades at about 40 times forward 2015 earnings.
Listen, Apple didn’t patent a “superior GoPro.” It’s just a feature that could enhance its iWatch, whenever that debuts. Don’t worry about that. Worry about more immediate things … like GoPro’s already-sky-high valuation.
As of this writing John Divine was long shares of AAPL stock. You can follow him on Twitter at @divinebizkid.
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