I’m always hesitant to use the “now or never” cliche when speaking about a company’s future, as death is never guaranteed in the stock market. For example, back in 1997, Apple Inc. (NASDAQ:AAPL) was hanging by a thread, just weeks away from bankruptcy, when sympathetic Microsoft Corporation (NASDAQ:MSFT) CEO Bill Gates gave the struggling company a much-needed loan. Now, twenty years later, Apple is the world’s biggest and most influential corporation.
Yet, somehow I can’t help but think that action camera icon GoPro Inc (NASDAQ:GPRO) is in a do-or-die situation right now. While I’m sure the GoPro name will continue to live on for the foreseeable future — GoPro has, if nothing else, successfully established the brand name — GPRO stock, as we know it, may not have much of a future.
Heard it Before
There’s little doubt that faithful owners of GPRO stock are already poised to point out the recent leak of the upcoming Hero 6’s specs suggest it’s going to be a game-changer. Not only is it a 12 megapixel machine capable of being submerged in as much as 30 feet of water, it will shoot 4K video at a rate of 60 frames per second — that’s twice as fast as its predecessor.
There’s also word the Hero 6 will be able to film 1080p video at 240 frames per second, meaning no matter which mode you choose, the device will be able to create some stunningly detailed imagery.
The official unveiling of the Hero 6, as well as the new Karma Drone, are reportedly going to be held before the end of this month, prompting stoked investors into a trading frenzy before the event. GPRO stock is up nearly 40% since the end of July, suggesting many traders expect the event to inspire consumer purchases over the course of the coming holiday shopping season.
The assumption makes superficial sense, to be sure. The problem is, very similar logic prevailed with the Hero 4 in 2014… and the Hero 5 in 2016. Yet, GPRO’s sales growth slowed in 2015 and earnings shrank. Sales outright fell in 2016, and the company posted a sizable loss of $419 million.
Perhaps the issue isn’t one of the quality and functionality of GoPro’s devices (the Hero 4 and the Hero 5 were both better then prior cameras from GoPro), but, rather, the premise of action cameras themselves.
Most everyone appreciates that GoPro’s cameras are second to none; most everyone isn’t willing to shell out a few hundred bucks for a toy they’ll rarely use, though.
Now’s the Time
Granted, that’s not what the stock’s been saying of late. GPRO has rallied from around $8.00 per share less than two months ago to its current value of around $11.00 largely in anticipation that the Hero 6’s unveiling event will wow the masses.
It’s a rally we’ve seen before, however.
GPRO moved from under $9 in May of last year to a high of nearly $18 by October, only to slide back to a low of $7.14 in March of this year. Among other things, the Hero 5 just didn’t sell as well as investors were expecting, or at least hoping. We saw a similar boom and then bust in 2015, much for the same reason we’re seeing a boom now — the market wants to believe, so much so that it’s putting its money where its mouth is.
There’s just one problem with the continual letdowns and the accompanying lowered expectations: You can only disappoint faithful followers so many times before they give up altogether and stop giving your stock a chance. While there’s nothing magical about the number itself, three tends to be the number of times investors have to learn a lesson before refusing to be fooled again.
This is the third time.
With the new Hero 6, GPRO has offered a glimmer of hope, suggesting this will be the device that puts GoPro back on track and permanently back in the black. Another failure, and traders won’t entertain the idea for a fourth time — even if that fourth time is the real deal. After the third failure, GPRO very much becomes a show-me-first kind of trade.
Bottom Line for GPRO Stock
Truth be told, we won’t really know how well the new Hero 6 will be received until early next year. It’s possible GPRO shares could continue to edge higher until then, and then press onward and upward even more should things go well.
That’s a very big “if,” though, and the company hasn’t exactly earned the benefit of the doubt it’s been getting of late.
If you’ve been trading GPRO stock simply by buying and selling the major swings that have more to do with sentiment and less to do with results, know that this kind of action from GPRO shares is likely coming to a close. From here, it’s mostly a fundamentals story… for better or for worse.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.
