While the U.S. stock market was largely in the red on the first trading day in 2016, GoPro, Inc. (NASDAQ:GPRO) stock enjoyed a nice rally. By around 2:30 p.m. on Monday, January 4, GoPro’s stock price was up more than six percent. Of course, having a nice start doesn’t guarantee future success, but for GPRO stock, this could mark a new beginning.
GPRO Stock: Great Start in 2016 for GoPro
Going into 2016, one of the biggest factors for GoPro’s success will be drones.
In May of 2015, GoPro’s founder and CEO, Nick Woodman, said that the company was working on a drone and the view would give consumers an “oh my God” moment. In December, the company announced that the drone would be called “Karma” and released a video captured by the drone’s camera. The device will be launched sometime in the first half of 2016. (Source: “Karma is Coming in 2016,” GoPro.com, December 8, 2015.)
To see how popular drones have become these days, let’s take a look at the International Consumer Electronics Show (CES) to be held later this week in Las Vegas. This year at the exhibition, the Unmanned Systems Marketplace will cover 25,000 square feet, double the space allotted at last year’s CES. Of course, this means there will be more companies making them—hence, more competition. In fact, drones will have 29 exhibitors at the 2016 CES.
Despite the competition GoPro will be facing, it actually makes sense for the company to develop drones. For someone to enjoy a drone, they don’t need to jump out of a plane or race down a mountain. In the past, GoPro stock bears have argued that the company’s action cameras did not have enough mass-market appeal. Now with drones, GoPro could be welcoming new consumers to the brand.
Also, for those wondering how GoPro did this holiday season, here’s a clue: on Christmas Day, the GoPro app ranked 42nd among all app downloads on “iPhones” in the U.S. On Christmas Day 2014, the GoPro app ranked 81st. (Source: “GoPro: App Downloads an Encouraging Sign, Says Dougherty,” Barron’s, December 28, 2015.)
“It appears that many more people received a GoPro for Christmas and immediately downloaded the companion app than a year ago,” said analyst Charles Anderson at Dougherty & Co. (Source: Ibid.)
The analyst has a “Buy” rating on GPRO stock and a $30.00 price target, which is more than 50% higher than today’s price. Anderson also pointed out that the improvement in app downloads did not capture buyers of GoPro’s low-end $130.00 “HERO” camera, because it does not support Wi-Fi to connect to an app. Moreover, app downloads did not capture repeat buyers of GoPro’s products because the app would have already been installed.
The Bottom Line on GPRO Stock
On the growth front, although there have been concerns about GoPro’s growth in the U.S., the company is doing phenomenal internationally. In the third quarter of 2015, international revenue outside of North America was up more than 175% year-over-year. International sales also totaled more than 50% of third-quarter revenue. (Source: “GoPro Announces Third Quarter 2015 Results,” GoPro, Inc., last accessed January 4, 2016.)
So who said that GPRO stock would be hurt by cheap knockoffs from Asia?
The bottom line: GoPro’s core business is fine and the company has a lot of new revenue drivers coming shortly.