TWTR Stock: Is Twitter Inc the Next GoPro Inc?

Twitter StockBefore Twitter fans start going crazy, let me assure you that the short answer is no. But if you take a closer look, you’ll see that Twitter Inc (NASDAQ: TWTR) stock and GoPro Inc (NASDAQ:GPRO) stock do have a lot in common—meaning the question isn’t that far-out.

First, the companies are facing similar issues in their growth strategies.

Remember Twitter Chief Financial Officer Anthony Noto’s comments during Twitter’s second-quarter earnings conference call? He said that “we have not communicated why people should use Twitter, nor made it easy for them to understand how to use Twitter. This is both a product issue and a marketing issue.” (Source: “Twitter’s CEO Jack Dorsey on Q2 2015 Results-Earnings Call Transcript,” Seeking Alpha, July 28, 2015.)

To put it simply, Twitter had trouble explaining the value of its service to users. That has led to limited penetration in its markets. Twitter’s growth has largely relied on early adopters and technology enthusiasts. But for others, Twitter is yet to convince them of its value.

Sound familiar? That’s exactly what GoPro has been struggling with, too. As an action camera maker, GoPro has raised concerns that the company’s niche might not be big enough to generate sustainable growth.

Investors have realized that there are only so many people who want to parachute out of an airplane or jumping out of a cliff in a wingsuit. So GoPro has a lot of work ahead to convince the mass market of its value.

Due to similar growth concerns, the companies’ stock prices have gone on similar paths. In the past 12 months, GPRO stock lost 76.3% of its value. How much did TWTR stock plunge? An equally large 68.4%!

Now, let’s look at why Twitter stock won’t be the next GoPro stock.

TWTR Stock: Twitter Is Not GoPro

Twitter is moving beyond its early adopters. These days, many people are using Twitter as a newsfeed. It has become one of the best ways to stay connected to live events. Therefore, Twitter has strong appeal for content creators and content consumers.

Turning to GoPro, you’ll see that the company is yet to break into the consumer market. Let’s be honest, there are probably more people watching skydiving videos than those that actually recording their skydiving adventures. Plus, the limited number of daredevils who want to film their experiences may have all already bought their action cameras. So, expanding GoPro’s products beyond content creators could be a challenge.

Moreover, Twitter’s service is essentially free. Unless you’re an advertiser, you can enjoy all of Twitter’s features without spending a single penny. Thus, if the company can convey the value of Twitter to a broader audience, it should be able to find growth.

GoPro doesn’t have this advantage. Despite slashing the price tag of its “Hero4 Session” cameras twice, GoPro’s products are still not cheap. In the future, GoPro is going to launch its “Karma” drone and a consumer version of its 360-degree camera. And those will probably be expensive.

Another challenge for GoPro is to build an economic moat wide enough to fend off competitors. No doubt, GoPro makes quality products. However, if the company wants to protect its leading position, it would need to convince consumers why it’s better than cheaper knockoffs made in other countries.

The Bottom Line on TWTR Stock

There you have it. While the journeys of TWTR stock and GPRO stock have been quite similar in the past, Twitter has a better chance of turning around its future.