Is There Any Upside for GPRO Stock?
Few companies suffered as much as GoPro Inc (NASDAQ:GPRO) did in 2015. GPRO stock constantly declined in value, dropping from the high $60.00s to near $10.00. Investors seem irrevocably bearish on the stock, yet there’s hope hidden in the ashes of GoPro’s shares.
The start of this year helped cement the belief that GoPro is finished. After a dismal fourth quarter and layoffs on the horizon, investors started digging a grave for GoPro. You know things are bad when four-percent declines look like a normal day.
But I wouldn’t give up hope yet. There is a part of me that grows skeptical at the notion of widespread consensus.
Whenever the market seems dead set against an idea, it’s usually worth re-examining that conclusion and whether or not there’s a way to exploit the mob mentality.
After all, Warren Buffett’s motto is to be afraid when others are greedy, and greedy when they’re afraid. It’s a proven strategy for buying low and selling high.
New Hope for GPRO Stock
Since I’m dishing out well-known (and true) investing axioms, here’s another one for you: past performance is NOT indicative of future outcomes. GoPro may have made a series of unforced errors in controlling the growth of its business, but that trend could reverse.
In fact, there are signs that a turnaround is already in place. At the 2016 Consumer Electronics Show (CES 2016), one of the hottest trends was virtual reality (VR). With Facebook, Sony, and HTC all releasing VR-ready consoles this year, it’s abundantly clear that VR is on the edge of mass adoption.
Where does GoPro fit into the picture? Bear with me; it’ll all be clear in a minute.
When Facebook gave users its first peak at VR content, it knew that most people didn’t already have a VR headset. For this reason, Facebook created something called 360-degree videos, which allow regular users to scroll to change their perspective in the video.
GoPro was Facebook’s official partner for launching 360-degree videos. The company has emerged as a leader on the production side of virtual reality, selling camera rigs that allow for filming in all directions simultaneously.
Better still, the rigs could accommodate GoPro’s existing line of cameras, removing the need for expensive upgrades. The VR market is still in its infancy, meaning that by getting in early, GPRO stock could benefit enormously off the industry’s growth.
The firm’s brand could become synonymous with affordable VR technology, expanding its consumer base to game developers, movie studios, and educational services. Any potential slowdown in its retail sales could offset a new enterprise division.
GoPro as an Acquisition Target?
As if Facebook wasn’t enough, GoPro also signed a partnership deal with Alphabet Inc, formerly known as Google, to bring VR all the way to YouTube. Google is building its own VR headset, but its product will be extremely low-cost compared to competitors. (Source: “Google Teams With GoPro to Bring VR to YouTube,” Re/Code, May 28, 2015.)
Google’s “CardBoard” headgear will only run customers about $20.00 a pop, which virtually guarantees mass adoption. It’s a ridiculously low price point for an experience that is far above what customers are used to.
For most of 2015, investors were able to push VR into the margins of GoPro’s valuation, but this year, firms are actually commercializing VR technology. The trends are set to converge in the next few months, giving me hope that GPRO stock could surge.