This Is a Game-Changer for GPRO Stock
If you are looking at GoPro, Inc. (NASDAQ:GPRO) stock, remember this quote by Warren Buffett: “Be fearful when others are greedy and greedy when others are fearful.” Since the beginning of this year, GoPro’s stock price has literally crashed to the floor. Now might be a good time to consider picking it up. Here’s why…
For a company to turn things around, it has to know what went wrong and how to fix it. Fortunately, GoPro just did that. In an interview with CNBC, the company’s CEO, Nick Woodman, attributed the disappointing results in the third quarter to two things: mispricing of the “Hero 4 Session” cameras and a lack of marketing efforts. (Source: “GoPro CEO: We Didn’t Market the Hero4 Adequately,” CNBC, last accessed October 29, 2015.)
The camera that Woodman was referring to was first launched on July 6, 2015 and commanded an original price tag of $399.00. Following the launch, the company decided to slash the price twice, each time by $100.00. Now GoPro’s Hero 4 Session camera stands at just $199.00, which is much better in terms of attracting new consumers.
GoPro Knows How to Turn Things Around
To address the lack of marketing of GoPro’s products, the company is bringing back TV advertising. Note that GoPro has not used TV advertising for a year and despite its online marketing campaign, there are still a lot of people who don’t know about GoPro. Getting back to TV ads could help improve the company’s brand awareness and reach new consumers.
GoPro is also working to improve the user experience. This time, the new feature allows you to control your GoPro with your “Apple Watch.” On December 10, GoPro announced that the GoPro app for “iOS” will be available on the Apple Watch as well.
This feature allows users to start/stop recording, preview shots, change capture modes, and add a “HiLight Tag” right from their wrist. This would make it much more convenient to use GoPro because to be honest, you don’t really want to fiddle with the buttons on the GoPro camera or use GoPro apps on smart phones before parachuting out of a plane or riding your bike down a mountain. (Source: “GoPro Releases Apple Watch Features for the GoPro App, Enabling Cool New Remote Control Functions for GoPro Devices,” GoPro, Inc., December 10, 2015.)
Mind you, despite missing its own guidance and Wall Street’s expectations, GoPro still had a more-than-decent quarter. Revenues grew 43% year-over-year, while adjusted net income increased 103.9% to $436.6 million. (Source: “GoPro Announces Third Quarter 2015 Results,” GoPro, Inc., October 28, 2015.)
Another important factor to note is the company’s margin. In Q1, Q2, and Q3 of 2015, gross margins were 45.1%, 46.3%, and 46.6%, respectively. What were the margins in the corresponding quarters last year? They were 40.9%, 42.1%, and 44.3%, respectively. That is, GoPro’s margin has been expanding both sequentially and year-over-year, which could translate to improved profitability.
While addressing the current issues, the company also needs to find new areas of growth to make GPRO stock attractive again. Luckily, GoPro already has some interesting projects in the works.
In 2016, GoPro will be stepping into the drone business. The company recently announced that its drone, currently being developed, will be called “Karma.” GoPro also released a video captured by the drone’s camera. Details of the device are yet to be announced, but industry experts are expecting a quadcopter with 4k filming capabilities. (Source: “Karma is Coming in 2016,” GoPro, Inc., December 8, 2015.)
Moreover, GoPro is in one of today’s hottest areas: virtual reality (VR). The company started selling its massive 16-camera VR rig called “Odyssey” this September. It can be used to capture images for Google’s new “Jump” VR ecosystem. As the VR industry starts to grow, pioneers like GoPro could be rewarded.
The Bottom Line on GPRO Stock
GoPro’s stock was trading at $18.77 a share on Tuesday morning. Given that shares are trading at a modest 15 times the company’s trailing earnings, investors are getting big growth potential at a reasonable price. As the company addresses its issues in the third quarter and achieves progress on its new projects, GPRO stock investors could see fruitful returns.