GoPro Inc (NASDAQ:GPRO) sold off yesterday, spurring people to once again speculate about the company’s potentially looming demise. The spark for the GoPro stock sell-off was a competitor called DJI, which announced a new drone that will compete with GPRO’s own forthcoming model.
DJI’s drone stands out because it’s a smaller option. The Mavic Pro, as it’s called, can fold to be as small as a water bottle, according to the company.
But while I could spend an entire article comparing and contrasting the specifications of DJI’s drone and GoPro’s drone, that would almost entirely miss the point.
The drop in GoPro stock yesterday reminds us of how easy it is for investors to get distracted by the trees and miss the entire forest. Knee-jerk reactions to news headlines like product releases are not a sound investment strategy, much less sound indicators for a company’s prospects. The fact that GPRO stock has already regained much of yesterday’s losses confirms that point.
GoPro Stock Investors Need Patience
The fact that competition is a huge factor for GoPro stock is hardly news. Increased competition is coming on the camera side from smartphones like Apple Inc.‘s (NASDAQ:AAPL) iPhone 7 and newer gadgets like SnapChat’s spectacles. As such, GPRO’s foray into the hot drone market has been highly anticipated.
But to freak out because that market, too, has competition is more than a little bit backwards. The announcement from DJI arguably proves the market and prospects for GoPro’s drone as much as it should raise concerns for fans of the company.
Indeed, the GPRO drone has actually been impressively received so far — something that must be taken into consideration before panicking at the thought of a competitor. Tavis McCourt of Raymond James spoke positively of GoPro’s drone announcement, noting that search volume was strong after the company revealed the availability and pricing for its Hero 5 camera and Karma drone. More specifically, he wrote:
“We will see how sustainable the search volume growth is over the next few weeks, but we suspect enough marketing buzz has been created to generate meaningful demand for Hero 5 and Karma, with the most likely risk to this assessment being if the products launch with some quality issues that engender bad press and/or consumer reviews.”
Meanwhile, other writers have been applauding the technical differences of the drone. In many ways, the GPRO drone has been one of the brightest spots for the company in some time, yet many investors are looking at it backwards.
To be clear, this is not a buy call on GoPro stock by any stretch of the imagination. As I’ve written before, GPRO was priced for growth, growth, growth because of all its early hype.
I still think there are better places to put your money. But I wanted to use GoPro stock as a reminder that reacting to news announcements like competitive product releases is just going to blur your vision with regards to making a sound, substantive assessment of a potential investment.
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.
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