GoPro needs a win and is looking at the Hero 5 to provide it, but the company has put its release on hold for a bit to add more features while making it small enough to work with the company’s first drone, the Karma.
GoPro still quality despite slumping stock prices, waiting on Hero 5
While GoPro’s stock might be down 75% since this time last year, it still trades 11 times forward earnings yet grew quarterly earnings by 28.6% and revenue by 43% over the same period last year. That’s not a sick company, just one whose stock price became highly overvalued following its initial public offering. The company also has over $500 million in cash with absolutely zero debt. Yes, hardly broken.
The Hero has been GoPro’s flagship action camera for four generations and the fifth will follow the others lead. The company made a tremendous error with the pricing of the Hero 4 Session and in order to rectify the poorly priced addition to the products line. GoPro tried to sell it at $399.99 at release, but lack of sales means the company has twice slashed the price and it now sells for $199.99.
Dov Gertzulin's DG Capital is having a strong year. According to a copy of the hedge fund's letter to investors of its DG Value Partners Class C strategy, the fund is up 36.4% of the year to the end of June, after a performance of 12.8% in the second quarter. The Class C strategy is Read More
That said, while someone surely erred there, it’s likely the delay is due to the company looking to add features, make it smaller, and bundle it with the company’s first drone, the Karma.
The company seems to be wanting to make a massive leap forward in quality video with the Hero 5 offering it with 8K video recording resolution. The Hero 4 Black records at half that, a paltry, by comparison, at 4K resolution.
It will also shoot videos at 60 frames per second according to a number of rumors including the latest from Crossmap.
In order to easily attach to the Karma drone, the company is looking to make it both smaller and lighter. While the Hero 5 will be able to take videos underwater, don’t try that if attached to the Karma.
Another rumor has the Hero 5 tripling the functional depth of the Hero 4 with videos being shot at as deep as 60 meters.
Introducing the Karma Drone and potential financial benefits to GoPro
While CES featured a number of consumer drones and even one designed to take a single passenger at over 60 mph to a distance of over two miles on a charge, GoPro’s Karma was not ready to show at this year’s CES. GoPro has released a video of the drones aerial photography but doesn’t feature an image of the Karma.
It did, somewhat cryptically say in the video, “What if you could fly? That would be magic.”
What would be magic for GoPro would be to release a drone that could capture a significant portion of the drone market. DJI is the leader in consumer drones at present but if GoPro could effectively bundle the two it could really help drone and camera sales. DJI, and primarily its Phantom line had roughly 70% of the consumer market in the beginning of 2015.
DJI sold over $500 million in drones in 2014, had over $1 billion sales last year and future growth is nearly inevitable in an industry that is estimated to grow by $4 billion by 2021.
GoPro will likely continue to sell its cameras to drone users no matter the brand, but taking a healthy chunk of this growth and existing sales could effectively double the company’s revenue stream.
Greed(?) from GoPro certainly hurt the company with the Session given the low margins that it enjoys with each camera. The successful pairing of the Hero 5 and the Karma would certainly help the company become something less than a one-trick pony, though it’s a really good trick, while building a product ecosystem for itself and investors alike.
Again GoPro is far from broken
Broken, no. Would I be happy if I jumped on the action camera maker’s band wagon in 2015 and bought its stock? Absolutely not. But again, those burned were presumably people buying far too late. It’s IPO was something nowhere short of incredible. We don’t push stocks here, or I certainly don’t, but many believe that the shares that you could have purchased at $98 in January 2015 are now trading around $11-13 this month.
That may make the stock worth a look, however that comes with a major caveat in the eyes of one Morgan Stanley analysis just recently said, “Apple, Google, or other industry giants enter the space and simplify video editing and authoring, making the hardware a commodity.”
That said, it’s also a strong possibility before those company’s got involved they might consider an acquisition of GoPro rather than starting from scratch. Scratch being a poorly chosen word as I’m sure both companies have already begun work on prototypes and experimenting with entering the market.