Amazon Sales Halt Won’t Stop GoPro Stock’s Rise: It Will Boost It
It seemed as if GoPro Inc (NASDAQ:GPRO) finally started to make a comeback. But, despite the company’s many fans shouting “Go GoPro!,” the enthusiasm proved unable to stop GoPro stock from falling when the company said it had stopped sales of its new “HERO5” camera on that king of online retail, Amazon.com, Inc. (NASDAQ:AMZN).
But does this warrant panic about GPRO shares?
As it happens, investors can let their guard down. Indeed, if anything, there is reason to welcome the decision. Not surprisingly, GoPro stock recovered nicely on October 17, gaining 3.5%. In other words, it made back what it lost the previous session, when it pulled the HERO5 from Amazon to renegotiate pricing.
This is important because last year, GoPro stock tumbled in the post-Christmas season. GoPro stock accumulated the majority of its 2016 losses in the first few weeks of the year. Evidently, the revenue from sales of its product disappointed analysts and investors. This time, realizing that online sales will account for a large chunk of its revenue volume, GoPro has halted sales in what is traditionally a slow period, that is, just about a month before the big retail extravaganza that is Black Friday and Cyber Monday.
There is no question that Amazon.com hits jackpots in multiple venues during the December-January period. The various colorfully coded boxing and holiday shopping spectaculars ensure this happens. Add “Amazon Prime” to that list and it becomes essential for companies to get the best possible price from retailers. GoPro has investors to look after as well, so forcing Amazon to fork up a little more cash is a good thing for GoPro stock.
GoPro Has Done the Right Thing for Shareholders
GoPro has essentially strong-armed Amazon to prevent the retailer from listing the HERO5 (and other GoPro products) at prices lower than the agreed-upon floor price. If Amazon lowers the floor price, it’s a big deal, because other pretenders to the top retailer throne—like Best Buy Co Inc (NYSE:BBY), Target Corporation (NYSE:TGT), and Wal-Mart Stores, Inc. (NYSE:WMT), just to name a few—establish their price floors based on Amazon’s prices. (Source: “GoPro Halts Sale of Latest Camera on Amazon,” Fortune, October 13, 2016.)
That’s why investors should have taken GoPro’s decision as a bullish sign. It took them a few days, but it seems they got it now. Amazon sales account for some 12%-13% of GoPro’s total sales. (Source: Ibid.)
Therefore, GoPro has reason to expect better earnings. Setting retailers straight is an important step, but not the only one. Having the right product lineup is another, and GoPro has just that. It may have its best product mix ever. Nick Woodman, GoPro’s chairman and CEO, always had the idea of storytelling as a foundation of the GoPro brand. Never before have the company’s products reflected this better.
The new HERO5 cameras, along with a new subscription service that easily allows users to post videos online, have created “an end-to-end storytelling solution.” (Source: “GoPro CEO: New cameras, drone, cloud upload make for a strong Q4, CNBC,” October 3, 2016.)
That “end-to-end” business might be rather awkward jargon, but the point is clear and Woodman is right. The subscription online service, “GoPro Plus,” adds revenue, as it costs $4.99/month but draws in users with a free trial. (Source: Ibid.).
But there’s more.
On October 23, just in time to catch the holiday shopping crowds, GoPro will unveil the “Karma” camera drone. This is a product that’s fun to fly, while being effective at filmmaking. The Karma comes in nicely-priced versions from a basic drone at $799.00 to fully-functional HERO5-bundled versions ranging from $999.00 to $1,099.00, depending on whether buyers choose the “Session” or the higher-grade “Black” series.
This is smart and will benefit GPRO stock. Customers who already own a camera, maybe a HERO5, don’t have to pay for it twice. They just get the drone. Those new to GoPro and the whole movie-making experience can buy a full package—drone included—for just over $1,100, with a subscription to GoPro Plus also included.