GoPro Inc (NASDAQ:GPRO) lost the confidence of many investors after failing to achieve profits over past three quarters. The company posted losses of $0.52 per share in the second quarter, $0.62 per share in the first quarter, and $0.08 per share in the fourth quarter of 2015. It is also struggling to compete with companies offering action cameras at a lower price.
GPRO stock lost nearly 70% in value over the past year. It went down from its highest trading price of $51.65 per share to as low as $8.62 per share over the past 52 weeks.
It appears that some investors are betting that GoPro’s upcoming products could drive the stock higher. Over the previous three months, GoPro stock climbed from $9.71 per share on May 24 to $15.00 per share on August 24.
Can GoPro Inc return to profitability and prove that it is not just a one-trick pony company with its upcoming products, the “Hero5” camera and “Karma” drone? The company’s management said yes. In fact, they are very confident that both products are growth drivers… and a catalyst for GoPro stock.
A Big Catalyst for GPRO Stock?
GoPro founder and CEO Nicholas Woodman assured investors that the company is on track to launching the Hero5 camera and the Karma drone later this year.
According to Woodman, the company is in a good position to achieve growth for the rest of the year because the demand for its products remains high. The “Hero4 Silver” is the best-selling digital imaging camera in the United States for the seventh consecutive quarter.
Woodman noted that GoPro’s revenue increased 20% to $221.0 million, and product shipments increased eight percent to 759,000 units sequentially. He said, “GoPro is well-positioned for the second half of the year. We now have a simple product line, a clean retail channel and clear indications of strong consumer demand. Hero5 and Karma will contribute to the largest introduction of products in our history, all in time for what we believe will be GoPro’s most exciting fourth quarter, ever — a quarter where we expect to return to profitability.” (Source: “GoPro Announces Second Quarter 2016 Results,” GoPro Inc, July 27, 2016)
According to Woodman, the Hero5 camera simplifies user experience because it equipped with several innovative and enabling features. He boasted that the camera offers the most convenient and connected user experience they have ever created.
Woodman added that Karma is much more than a drone because it would improve how people capture their life from the sky or otherwise. According to him, the drone is easy to use and versatile. He said GoPro is poised to become an innovator in a growth category.
PricewaterhouseCoopers estimated that the current global market for commercial applications of drone technology is around $2.0 billion. It is expected to expand to as much as $127.0 billion by 2020. (Source: “Global Market for Commercial Applications of Drone Technology Valued at over $127 bn,” PwC, May 9, 2016)
Market observers are speculating that GoProwill release Hero5 and Karma in October, which could be a catalyst for GoPro stock.
GoPro Mobile Editing Apps Quik and Splice
GoPro’s recently acquired and rebranded mobile editing apps called “Quik” and “Splice” offer promising opportunities for the company. The combined monthly active users (MAUs) of the apps have doubled to 3.7 million since May. The cumulative downloads for the apps were 37 million times.
The figure shows that mobile editing solutions are relevant to smartphone users, particularly those who are photo enthusiasts. Remember that billions of smartphone users are taking photographs using their device. The company could leverage its Quik and Splice mobile editing apps to attract those smartphone users to participate in the bigger GoPro ecosystem. It is also likely that it could encourage them to buy any of its action cameras or its upcoming drone in the future.
GoPro’s Exclusive Partnership With India’s Reliance Digital
GoPro Inc expanded its international presence in the second quarter with its exclusive partnership with Reliance Digital, the second-largest retailer of consumer electronics in India.
Reliance Digital is selling GoPro products across India through its 1,800 stores and online channels. Most technology companies, such as Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ: FB) consider India as a critical market for growth. India has 1.3 billion people, including 440 million adults (Millennials) and 390 million teens and children born after 2000 (Generation Z).
A recent report from Goldman Sachs Group Inc (NYSE:GS) indicated that tech-savvy youths in India dominate the country’s urban population of 130 million, and they could drive the growth of a consumer market deeply tied into mobility and connectivity over the next five to 10 years.
GoPro’s partnership with Reliance Digital is a strategic move that could help boost revenues from its hardware and software.
The Bottom Line for GPRO Stock
The management of GoPro is confident that Hero5 and Karma could make the company profitable again. Some investors are convinced, but others are staying on the sidelines because they want to see that Karma is not just a good drone; it should be unique and highly competitive when it comes to price and features.
Investors also want to see if the Hero5 has compelling capabilities that could attract GoPro users to upgrade their device or new consumers to buy it. The GoPro Karma should be better than DJI’s $399 “Phantom 3 Standard” quadcopter and other drones currently available in the market in order to be able to get a big chunk of the industry.
GoPro stock at its current trading price is cheap but volatile. I believe investors could gain from the stock in the short term. The launching of Hero5 and Karma could have an enormous impact on the stock; it could soar significantly if both products are impressive with competitive price. If not, GPRO stock could end up in the gutter.