Is it Time to Bet on GoPro’s Turnaround?GPRO) shares have been absolutely hammered in 2016. It has only been under three weeks in 2016, and GoPro has already lost over 30% of its value. Investors are starting to realize that the once-hyped business model of GoPro is fragile and susceptible to increasing competition. While GoPro’s fad may be dying, I think every company, no matter how overvalued it once was, has a right price. And I believe GoPro is current trading around that price. In my opinion, buying GoPro for under $12 can prove to be a great speculative investment.
GoPro’s Karma might save it from drowning
In Q3FY15, GoPro shared earnings per share of $0.25, $0.05 less than the consensus estimate of $0.30.
While things don’t look for GoPro now, it can reverse its fortunes going forward. The company chiefly blamed retailers for slower-than-expected sales in the first half of the quarter, which results in poorer sales of its capture devices. The company believes that its projected revenue was also adversely affected by $21 million allied to its decision to drop the cost of its latest HERO4 camera by another $100 in the last month of 2015.
Till today, GoPro has not revealed its new device’s, called Karma, price or specifications. But investors are concerned as the company dropped its HERO 4 price two times, and now the product is available for $199.99 in the market. At present, GoPro’s management seems to be confused about deciding Karma’s price. However, it is mandatory for the company to prove investors that it can positively execute a new product launch.
GoPro manufacture quality products and its camera have a loyal list of clients. In spite of pricing problems faced by the company and worries about rivals entering into the camera segment, it somehow managed to hold a positon in top three best-selling camera products on Amazon.com. A new product cycle may be what GoPro needs to begin its turnaround.
In addition to that, the company can also expand in the drone market. As drone market is at its infancy, GoPro has noble opportunity to grow further in the drone market, but the largest competitor DJI stands in the company’s way as it accounts for almost 70% of the consumer drone market in 2015.
Every stock has a right price and I think GoPro’s current price is conservative. A new product cycle, along with expansion in the drone market may be exactly what GoPro needs to kick-start its turnaround. For these reasons, I think investors should now consider GoPro as a speculative investment.
Published on Jan 18, 2016By Yaggyaseni Mittra