I will place a huge disclaimer right off the bat: I’m not at all a fan of GoPro Inc (NASDAQ:GPRO). I’ve blasted this action-camera company more times than I can remember. Some of my good colleagues from my Sony Corp (ADR) (NYSE:SNE) days transitioned to GPRO. Now, they’re transitioning to the unemployment line. I’m not necessarily hostile to GoPro stock, but I want you to know where I’m coming from.
For quite some time, I’ve been right to question GPRO.
If you had invested in GoPro stock from its opening trade, you are hating life. A 68% market loss does that to people. And if you picked up shares near its peak price point, you’ve hemorrhaged 80% or more. At that magnitude of pain, you might as well just stick around to see what happens next. Undoubtedly, many early proponents are doing exactly that.
Of course, GoPro stock is witnessing a bit of a resurgence lately. In just this month alone, shares are up an amazing 25%. Nevertheless, I persisted in my bearishness, hating on GPRO again on September 13. Technically speaking, shares are still up 1% from the time of publication.
For the time being, bearish voices may get drowned out from rising enthusiasm. In the trailing 30 days, GoPro stock is up 24%. Extending the period out to the last three months, GPRO gained a whopping 48%. Even if you “hate” GoPro the investment, there’s no denying the momentum.
Whether it can keep it going or not has always been one of the dark clouds for which the company had no answer. I don’t think anything has changed in that department.
Still, let’s play nice for a change. Here’s what management needs to do to make GoPro stock appealing.
GPRO Needs to Reconnect with Its Audience
In many of my write-ups for the action-camera company, I criticized what I believe to be a commoditized industry. When GPRO first launched, it was a revelation. Everyday folks could now film themselves actually doing things, and the end product was remarkable.
Prior to GoPro cameras hitting the markets, you typically had to have another person film your stunts or action scenes. Sure, you could use tripods, but they’re stationary. Or, you could manually attach the camera to your body, but without GoPro’s sophisticated motion-smoothing technology, the result was vomit-inducing.
GPRO not only filled an existing demand, it also sparked interest in action videos. Part of the beauty of GoPro is that no one outside of the sports or entertainment industries needs their products. Instead, it’s about desire, and luring people into a budding subculture. Because the company was so successful at this, early investors flocked to GoPro stock.
But with time comes competition. Sony, TomTom NV (OTCMKTS:TMOAF) and Garmin Ltd. (NASDAQ:GRMN), to name but a few, capitalized on the action-camera craze. GoPro is no longer unique, and its first-to-market advantage has waned. When given the choice, I’m sure most people would favor the lower-priced product (especially since it’s not a needed product).
But here’s where I overlooked something. The action-camera industry, though commoditized, is stronger than many folks realize. Three years ago, Futuresource Consulting forecast that global action-camera sales will hit 9 million units in 2018. That mark was almost met in 2015!
To truly take advantage of this industry bullishness, GPRO needs to once again create a subculture like they did for their original Hero model. They ultimately must convince the consumer why shelling out hundreds of dollars more for their product is worth it. It’s no exaggeration to say that GoPro stock depends on this strategy.
GoPro Stock Requires Out-of-the-box Thinking
Another contributing factor is the consumer-tech firm’s drone division. Again, it’s hard to ignore the fact that today, “droning” is big business. Furthermore, I really dig their Karma drone. It’s an incredibly versatile system that media professionals and enthusiasts will love.
Unfortunately, drones are massively bulky, which forces them to be purpose-specific. Because of this limitation, GPRO should focus on markets other than consumer retail. If the flight time of the Karma platform could be extended beyond the manufacturer-stated 20 minutes, it could serve a commercial or civil service. Certainly, law enforcement could find great use for drones, should the technology advance further.
Will a strategically-revamped company be enough for GoPro stock? It’s absolutely a long shot. My outlook is still bearish. But if management can spark the magic that made the original GoPro camera a resounding success, they can make us bears look like fools. I’m just not holding my breath.
Josh Enomoto is long SNE.
