GPRO Stock Acquisition Makes Perfect Sense
One headline after the other, a string of bad news has hit GoPro, Inc. (NYSE:GPRO). The company is rumored to be facing slowing demand after supplier Ambarella hinted inventories are building up. Analysts consequently downgraded GPRO stock, hitting shares hard. But with rumors swirling that Apple Inc. (NASDAQ:AAPL) could be interested in taking over the company, GoPro shares look like a bargain.
To begin with, I feel urged to mention why I believe the company has been struggling, despite having great products. GoPro’s problems lie beyond the company’s core business. In ways, the troubles may have more to do with a lack of corporate direction.
Recently, the company slashed the price for its “Hero4 Session” camera for the second time within months of its launch. Under normal circumstances, the price cuts would have driven higher demand and ultimately, higher sales. However, the strategy completely backfired. The move, I believe, did more harm to the brand than good.
Take, for instance, Apple. The company did not offer any promotional price cuts this year, even when competitors were offering bargain prices this holiday season. Apple, in effect, maintained its premium brand reputation.
Now, GoPro CEO Nick Woodman’s thrill-seeking personality may have initially brought popularity to the action camera company. But over time, GPRO stock has only become increasingly riskier for investors. The company’s marketing strategy has been appalling. Not only did the management underinvest in marketing, but they also miscalculated their products’ pricing.
Certainly, the company can do better if it has better brains in its c-suite. Nonetheless, I still believe the company is valuable and could make a great acquisition target!
On Thursday, rumors made rounds that the company could potentially become an acquisition target for Apple. The FBR analyst who’s proposing this may be right on some levels. One of our analysts at Profit Confidential floated this idea way earlier, too.
GoPro’s already-developed market of wearable cameras can be a great addition to Apple’s product portfolio. With Apple’s brand name, the products could receive a further boost in demand. The company is expanding its control over the “Internet of Things” (IoT) industry and GoPro’s cameras could provide further traction.
Now, GoPro is also working on virtual reality (VR) and flying cameras, both markets remaining relatively untapped at Apple, but both offering lucrative growth opportunities. All of Apple’s main competitors are delving into these markets, including Google, Amazon, Samsung, and Microsoft. The acquisition does make sense and the idea could become the basis for something beyond one analyst’s wishful thinking.
The second good news is that the company has finally disclosed the name for its drone, “Karma,” with a stunning video on YouTube. So far, viewers are loving it. (Source: “Karma is Coming!,” GoPro’s YouTube channel, December 9, 2015.)
The drone is expected to be priced competitively with its Chinese peer DJI’s drones and will certainly enjoy strong demand in a niche where substitutes are both limited and mostly of low quality.
The Bottom Line on GPRO Stock
History is littered with examples of good companies with good products and good brand recognition that suffered because the management at the helm of affairs was either conceited or incapable. It’s high time Woodman gets serious and finds a replacement for the company’s marketing team. Otherwise, investors will, sooner or later, start demanding a replacement for him.
Until we see an indication from Apple’s management, the acquisition idea remains a figment of our imagination. However, GoPro still has a chance to save itself through innovation if it has someone to guide the company in the right direction. A healthy sign is that the company has been stepping up on R&D and is gearing up to launch two new products in 2016.
In a nutshell, I’m still hopeful for a turnaround in GPRO stock in the coming year.
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