GoPro, Inc.’s GPRO shares rose 5.7% in Friday’s trading session as the action camera maker draws nearer to launching its much-awaited drone Karma. It finished the week 18% higher.
This is somewhat of a turnaround for GoPro, which had a brutal time last year, having shed 71% of its value. The start to 2016 was not impressive either, as it lost over half of its value by May. However, the stock has rebounded sharply since then, despite the initial delay in the rollouts of its new products. In fact, the actual recovery in GoPro's stock price began after the stock bottomed out in May, and has soared a whopping 74% since then.
GOPRO INC-A Price and Consensus
Let’s take a look into the hype surrounding Karma and what’s riding on its success.
The Launch of Karma
This San Mateo, CA-based company will unveil its flying-camera drone Karma – a product that will take the company’s portfolio beyond action cameras – at a product launch event today. In fact, GoPro might also introduce its long overdue action-camera upgrade – the Hero 5 – in the same event.
The GoPro Karma is designed particularly to record extreme action footage from the sky. It is likely intended to challenge DJI and its Phantom range’s air dominance.
GoPro has been quite mysterious about its quadcopter’s specifications and capabilities. However, it has released a few teaser videos recently. A quick analysis shows that the drone is powered with amazing obstacle collision sensors and exceedingly tight flight control. It also seemed to possess some kind of noise cancellation technology.
Although GoPro will have to compete with other players like DJI and Parrot, which have years of experience with this technology, GoPro insists that Karma will come with revolutionary features that will make it stand out from other drones.
GoPro’s Ground Reality
GoPro’s revenues plunged to almost half year over year in the first half of 2016. The company has been struggling to achieve its earlier growth in the recent months. Its latest camera – the Hero 4 Session – failed to hold consumers’ interest at a time when the market for action cameras is being flooded with cheaper and better alternatives. Some ill-timed product missteps and strategic pricing errors increased the woes for this company. Competitive forces from Sony Corporation SNE and China's Xiaomi are also exerting pressure on GoPro’s market share.
GoPro has been betting too much on these two products becoming game-changers for the market.
However, the action camera maker has done a great job of clearing out channel inventory and streamlining its product portfolio. It has also taken huge strides in developing content distribution and software in recent times.
After three quarters of sharp year-over-year revenue declines, GoPro has finally created a product lineup that could potentially reverse the trend.
Some analysts are quite optimistic about the new Hero5 series, the focus on cloud connectivity and software, GoPro’s reduced channel inventory and the quadcopter Karma.
It will be quite interesting to track GoPro’s stock price gyrations, as consumers absorb and decide whether Karma is good enough to change this Zacks Rank #3 (Hold) stock’s dwindling fortunes.
Stocks to Consider
Some better-ranked stocks in the broader consumer discretionary sector include Electronic Arts Inc. EA and Activision Blizzard, Inc. ATVI, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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