GoPro stock has declined about 40% in the last three months. Most analysts on the Wall Street remain bullish on the stock. In fact, Citi analyst Jeremy David believes that the recent pullback represents an attractive entry point. However, Barron’s said Sunday that “danger lurks” over GoPro as other players enter the action camera market.
GoPro is a one-product wonder
Alexander Eule of Barron’s believes that the stock could sink another 28% to $25. He argues that one-product wonders rarely sustain their dominance. He puts GoPro in the same league as Palm, Flip, and BlackBerry that once ruled their markets before being reduced to dust (well, almost in case of BlackBerry). Shares of the San Mateo-based company have declined from the October 2014 peak of $98 to about $34 today. Its valuations are no longer sky-high, but the risk persists.
Rob Lopez of research firm Vertical Group says the “secular and structural concerns” about the action camera maker are still intact. GoPro’s chief financial officer Jack Lazar confirmed earlier this month that the company’s brand new Hero4 Session received an underwhelming response from consumers. Vertical Group expects GoPro’s earnings to grow 12% next year.
Zero chance of Apple buying GoPro
Investors have been “skittish” about GoPro’s ability to thwart competition. In January, GoPro tumbled more than 12% merely because Apple was granted a camera-related patent. China’s Xiaomi has launched its own action cameras. Though Xiaomi’s new camera is nowhere as good as GoPro Hero, it is cheaper and it could hurt GoPro’s international expansion efforts.
Another problem is that the U.S. action camera maker relies on Sony for image sensors, which puts it in a vulnerable spot. Sony has its own range of 4K and HD wearable action cameras. Undoubtedly, GoPro has built an impressive brand. And given the company’s current valuation, some analysts believe that Apple could offer to buy GoPro.
However, Rob Lopez of Vertical Group says that there is “zero percent” chance of Apple buying the action camera maker. The Cupertino company has ample resources to build an impressive action camera in-house.
GoPro shares fell 1.62% to $34.58 in pre-market trading Monday.