Is GoPro, Inc. a One-Hit Wonder? Not Necessarily.
If you are thinking of dumping GoPro, Inc. (NASDAQ:GPRO) stock, think again. GPRO stock may be in the dumps, but at this point, there are quite a few things going for it. Let me explain.
GoPro’s Move into Virtual Reality
Virtual reality (VR) is quite a hot topic these days and almost every tech company wants to get involved. However, if you look into it, you’ll find that virtual reality isn’t really all that new of an idea. For instance, Battlezone, an arcade video game from 1980, used 3D vector graphics to immerse the player in a VR-like world. In the 1990s, Sega announced the Sega VR headset for arcade games and consoles, but only the arcade version was released.
Here’s the thing with GoPro: unlike many companies claiming to be in the VR business, the company is actually making progress to bring virtual reality to the public.
In May, GoPro announced that it was developing a 360-degree, 16-camera array to capture images for Alphabet Inc’s (Google’s) new “Jump” VR ecosystem. In September, the 16-camera VR rig, named “Odyssey,” became available for purchase, though the $15,000 price tag seems a bit steep and only “professional content creators and producers” are allowed to buy it at this time. But then again, controlling who makes the first VR videos might be important for GoPro, because it wants to make sure that the experience looks great, as it is a very crucial step in GoPro’s move into the VR business.
You see, although the company is the leader in durable action cameras, producing VR content also requires software technology. By releasing a device that fits into Google’s “Jump” VR system, GoPro’s burden to develop its own software is massively reduced. The cameras will be automatically synced using Google’s software for Jump.
GPRO: Benefiting from Growth in the Action Camera’s Market
Another thing that could help drive GoPro’s stock price upwards is growth in the market for action cameras. In 2014, the worldwide action camera market grew by 44% to 7.6 million units, with a retail value of $3.2 billion. Going forward, the momentum is still strong: analysts are forecasting that the global action camera market will grow at a compound annual growth rate (CAGR) of 22.2% between 2014 and 2019. (Source: “Worldwide Action Camera Market Up Nearly 50%,” FutureSource Consulting, last accessed November 25, 2015.)
The report is also positive on the VR industry, which GoPro is stepping into. According to the report, the percentage of action cameras that can take 360-degree videos is expected to grow from one percent in 2015 to 14% in 2019.
This is good news for GoPro. As the leader in the durable camera business, strong growth in the market could imply strong growth for the company.
As a matter of fact, GoPro’s growth has been nothing less than remarkable. In the first three quarters of 2015, revenue increased year-over-year by 54%, 71.7%, and 43.0%, respectively. Moreover, unlike some companies in the tech sector, GoPro is actually making money. In the third quarter of 2015, the company’s adjusted net income increased 103.9% year-over-year to $36.6 million, which isn’t bad for a company with a market cap of just $2.66 billion. (Source: “GoPro Announces Third Quarter 2015 Results,” GoPro, Inc., October 28, 2015.)
The Bottom Line on GPRO Stock
Sure, short interest is high on GPRO stock at the moment. However, remember that those shorting GoPro will eventually have to cover their positions. For a company with a leading position in its industry and strong growth prospects, it is only a matter of time before investors realize the value of GoPro.