Has GPRO Stock Bottomed Out?
Despite a series of declines this year, GoPro, Inc. (NASDAQ:GPRO) could be headed for a turnaround in 2016. GoPro stock has been the victim of Wall Street’s expectations game, but that doesn’t change the underlying fundamentals of the company. Over the next year, three tailwinds could lend some much-needed support to GPRO stock.
One of the reasons GoPro has suffered enormously is its relationship to the broader economy. Consumer sentiment is directly linked to the number of cameras sold, meaning the GPRO stock is pro-cyclical.
When people are uncertain about their job security or ability to pay rent, does it seem likely they will buy an action-oriented camera? No. But when there are a few extra dollars in consumers’ pockets and the future is hopeful, GoPro sales rise.
By that logic, we should be seeing a resurgence in GPRO stock sometime soon. After all, the Federal Reserve has all but guaranteed an interest rate hike when it meets next week.
The Fed’s Effect on GoPro Stock
By raising interest rates, the Fed is trying to end seven years of babysitting Wall Street and the markets. Cheap borrowing costs helped revive the economy, no doubt about it, but part of the strategy was to suppress the U.S. dollar.
Higher rates will reverse that trend, leading to a stronger U.S. dollar and, by extension, more purchasing power for all Americans. Imported goods will become more affordable. Consumers will end up spending less than they normally would, leaving room for more extravagant purchases.
That being said, it’s not as if GoPro cameras are all that expensive anymore. The company is pricing its “Hero4” at a ridiculously low $199.00. That’s professional-level equipment available at a price that’s affordable to amateurs. (Source: “GoPro Shop,” GoPro, Inc. web site, last accessed December 9, 2015.)
In this way, GoPro is an extension of the modern state of media. In a world of YouTube and Livestream, anyone can become an Internet sensation. The lure of fame and artistic fulfillment turn a lot of people into aspiring content-creators. GoPro offers these folks a cheap and easy way to legitimize the quality of their content.
But that’s just one strand of the company. GoPro could lean more heavily on its “Professional Solutions” unit, which has a specialized suite of products. For instance, GoPro developed a camera that can broadcast a live feed from concerts, sporting events, or other location spots using a small transmitter.
But more important for GPRO stock, the company has taken an early lead in the hardware side of virtual reality (VR). Immersive experience hardware, such as that offered by Facebook’s “Oculus Rift” (hitting stores in 2016), is going to be the next big thing in entertainment. GoPro is making the cameras used to film VR content. (Source: “GoPro Odyssey VR camera will cost $15,000, arrive in November,” Mashable, September 8, 2015.)
Where’s GPRO Stock Headed in 2016?
For the most part, GoPro is simply building mounts that would allow for enough cameras to capture 360-degree visuals. Those images are then stitched together to form an immersive environment. The sale of the mounts plus accompanying cameras (yes, in the plural) would bring in tons of cash for GoPro.
In either case, GoPro stock needs a reversal of momentum to the upside. The nearest event that could launch such a reversal is the Federal Reserve’s impending rate hike, which would provide a stronger consumer base within the United States.