GoPro Inc may dominate the action video camera market, but it apparently lacks in one key area: software. Of course video editing software in general tends to be difficult for the average user to use, but Morgan Stanley analysts warn that if GoPro doesn’t do something about this problem, another company might. They think this could result in the commoditization of the company’s cameras.

Morgan Stanley Initiates GoPro Inc (GPRO) Coverage

Producing videos “too tedious”

In their report dated Dec. 17, 2014, analysts James Faucette, Meta Marshall and Yuuji Anderson said they decided to try out GoPro’s camera and document their lives while writing the report. They said although they’re proud of the video they made, they “ruefully” admit that most people probably wouldn’t be able to watch the video they made or at least would find it “almost completely uninteresting.” They also say it took them almost eight hours to make a video that’s less than two minutes long.

The Morgan Stanley team said as time goes on, video editing will become easier due to Moore’s Law, just as photo editing became easier with still photos. They say the cost of compute power will fall enough to make the automation of video content less expensive and easier.

GoPro must lead in video editing

In order to stay at the top of the heap in video cameras, the analysts said GoPro Inc (NASDAQ:GRPO) will have to lead the automation of video editing. If the company can do this, they think it will be able to “maximize the value of its hardware business.”

However, they said if GoPro lags behind competitors or otherwise fails to lead in creating automated video editing software, the company’s margins will become pressured as its cameras become commoditized.

Will GoPro miss a big opportunity?

The Morgan Stanley team thinks Wall Street is generally underestimating how big of a market opportunity GoPro really has. They said most of the investors they polled didn’t know that the digital camera and camcorder market is expected to be 68 million units this year with an average selling price of $421. That’s compared to GoPro’s estimates sales of 4.9 million units with an average price of $239.

They think the company has an opportunity to take a “substantially larger” piece of the market, but only if it can successfully automate editing of the video content taken by users of its cameras.

GoPro initiated with Equal-Weight rating

The analysts initiated coverage of GoPro Inc (NASDAQ:GRPO) with an Equal-weight rating and $57 per share price target. They based their price target on “a balanced view of probabilities” that the company will be able to expand into the bigger addressable market compared to being unable to push mass market adoption by improving the usability of its product, which would also result in a successful defense of its position in the market.

Their base case assumes a 20% compound annual growth rate for GoPro’s revenue to achieve about a 20% share of the digital camera and camcorder market by 2018.

Shares of GoPro Inc (NASDAQ:GRPO) slipped nearly % during regular trading hours today.