More Upside for GoPro Stock?
In the past few weeks, GoPro Inc (NASDAQ:GPRO) stock has enjoyed a bullish ride on Wall Street.
GoPro investors have rediscovered a liking for GoPro stock. It’s not quite love yet, but GoPro has gained 16.84% over the past 30 days, hitting a high of $11.30 in this period. You don’t need to dig too deep to understand the reason for this surge of optimism in GoPro stock.
Still, there’s no denying that GoPro has a steep path ahead to recover even half of the value that GoPro stock has lost since August 2015, when it was trading at about $63.00 per share—not to mention the $86.00 share price the stock hit in October 2014. It would seem that anyone who bought GoPro stock in its heyday is going to need much patience—or, to use a New Jersey euphemism, to “fogettaboutit.”
The bullish case for GoPro stock will clearly resonate better with those who have recently considered the stock. Bullish analysts have predicted a target of $21.00 for the near term, which seems reasonable. I’m bullish on GoPro stock too for three reasons. (Source: “GoPro second quarter guidance seems promising, according to Street analysts,” The Country Caller, June 22, 2016.)
First, the valuation is compelling. GoPro has all the cards to support a bullish case from the current valuation—it makes the best products of its kind for that price; it has a handle on the new technologies to enhance and develop its products to reach a wider audience, and GoPro also has secured the right partnerships to both advertise and fuel the appetite for its products.
This is no small point because strong marketing is what has helped GoPro improve sales in the latest quarter. GoPro’s CFO said that the company has better prospects in the second quarter thanks to marketing-driven retail demand. GoPro stock has moved some eight percent higher since the favorable outlook that emerged from the second-quarter results. (Source: Ibid.)
Looking ahead, GoPro’s bullish future still revolves around cameras. The company has not set off on a brave new course—it makes cameras. Virtual reality (VR) will represent an important new market for GoPro. Any company in the processor or camera business that does not have products ready for the unfolding VR revolution has failed already. Therefore, if GoPro stock is moving up again, it’s because the company has not lost track of the need to innovate and expand its product roster.
GoPro is not only evolving its camera and hardware lineup; it has also invested in video editing software to enhance the overall GoPro experience. In 2015, GoPro bought Kolor, which makes special 360-degree cameras. Apart from the “Odyssey” drone for 360-degree shots, which retails for some $15,000, GoPro is preparing to launch a cheaper version called the “Omni” for some $5,000 in the summer of 2016. GoPro is not betting the family farm on its VR entry. It will not be developing a VR helmet to compete with Facebook.
This should please GoPro shareholders. Sometimes it is better to be less ambitious. Still, GoPro can offer action cameras coupled with Kolor software. A wider range of consumers now have access to an exciting and very affordable solution to capture, create, and share 360-degree content. GoPro’s wide distribution infrastructure will make it easy to exploit the sales potential of the VR and related applications. GoPro will do for the 3D camera what it did for the action camera.
Finally, the recently announced partnership with Red Bull could be an instant catalyst. Red Bull makes the world’s most famous energy drink. This is no small deal when it comes to GoPro, considering the beverage company’s high-profile forays into action, adventure, and sport (Formula One racing is just one of them). Red Bull’s slogan is that it “gives you wings.” The analogy with GoPro stock is not hard to fathom. If not wings to fly to its 2014-2015 highs, GoPro stock can certainly run upward in the short and medium term.
Red Bull and GoPro is not just an advertising partnership. The two companies have secured a long-term agreement to create and promote content. Red Bull will source point-of-view imaging technology to capture its media productions and events exclusively from GoPro.
Both Red Bull and GoPro, for which outdoor sports are part of both their DNA, announced Tuesday the establishment of a global partnership. GoPro is the exclusive supplier of Red Bull, which will fully benefit from his POV cameras and its immersive content. (Source: “GoPro and Red Bull Form Exclusive Global Partnership,” GoPro, May 24, 2016.)
This is a big deal. GoPro will cover more than 1,800 Red Bull events in more than 100 countries. (Source: Ibid.) Moreover, Red Bull has built a powerful global network, which will now be available to GoPro. In short, GoPro can develop its business piggybacking on Red Bull’s huge name.