After plunging to a low of $9 in early February, GoPro Inc (GPRO) has tried valiantly to make up for lost ground.
Unfortunately, its incremental upward movement seems to have stalled entirely as we enter April. Time after time over the past few weeks, share prices have perked up for a session or two before dropping again, reinforcing investors’ frustrations with the stock’s inability to recover its value.
What GPRO needs is a catalyst to bring the company back to the forefront of investors’ consciousness — but does management have one?
GPRO Stock Looks to the Karma
It’s possible that GPRO’s new drone camera, Karma, could be the company-saving product. All we know is that it will hit the market in the first half of the year, which gives management about three months to pick and publicize a launch date, and also fill the retail channels.
However, so much is riding on Karma that the lack of a clear ramp at this late date is frustratingly coy — either management is underestimating how thirsty investors are for a worthwhile product, or there are glitches in the rollout. Neither option bodes well for GoPro stock when it comes to soothing Wall Street’s frayed nerves.
This is the kind of product and audience that rewards audacious viral marketing stunts, but there’s been no marketing push to get consumers excited. All we have so far is 40 seconds of prototype footage. The footage is cool, but it’s already close to four months old and has collected just 600,000 views in that time.
You’d expect to see more frenzy around the launch just 90 days out on a make-or-break product. That’s how investors know a product will be a hit right out of the gate: when fans are clamoring for it months in advance. Instead, we have a few polite comments on YouTube.
If you remember, the original GPRO cameras weren’t an instant craze either. Sales ramped up quickly by consumer electronics standards, but even if Karma follows the original GoPro camera ramp, it’s going to take too long to move the needle on the company’s fundamentals. The original camera took three years to grow to $3 million in annual sales. That’s fantastic for a startup, but $3 million three years from now adds a measly 0.2% to the company’s current revenue pool.
Some models already assume that Karma will ramp up to around $600 million in sales in the first three years after release, but to me that seems extreme. It doesn’t line up with the tentative marketing we’ve seen so far — and given the soon-to-be crowded drone space as well as the company’s recent weak performance, I’m not optimistic.
In the meantime, GPRO stock’s other camera sales seem to have peaked until consumers see a great reason to upgrade to the next generation. Sales targets are tracking 15% below last year’s levels, which essentially rolls its growth curve back to pre-IPO levels in mid-2013. Even if Karma executes as well as the analysts hope — a big “if” — no one expects the fundamentals to grow back to peak valuations before the holiday season of 2017.
That’s a long time and a lot of opportunity for the stock to move even lower, or for the Karma release train to hit a few bumps.
So for the near term at least, if you’re interested in investing in GoPro stock, I recommend looking elsewhere.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.