Don’t Be Fooled by GoPro’s ‘Strong’ Earnings

After months of underperforming, GoPro (GPRO) has managed to bite back at the bears by reporting a strong quarter. In the reported quarter, GoPro's revenue came in at $221, a surge of 20 percent quarter over quarter, but approximately half compared to $420 million in the same period last year. The company beat estimates despite sharing falling sales.

However, this does not mean that GoPro stock is a buy, as there are some severe problems with the company. GoPro successively teases the market about approaching services and products, but hardly delivers on the promises.
For instance, the company declared that it was developing a cloud platform for storage as well as editing purpose, and an individual 360 degree camera, but there has been no news regarding those products till date.

On the other hand, GoPro also stated its new Karma drone would be launched in the first half of 2016, but then the company delayed its launch to the holiday quarter. This clearly signifies that the company’s management is not working seriously.

Apart from this, Samsung (SSNLF) has also entered the race and will prove to be a tough competitor for GoPro.
Don’t Be Fooled by GoPro’s ‘Strong’ Earnings
Image by farioff / Pixabay
Not only Samsung, but the company also faces rivalry from 360Fly, Kodak etc. The products from these companies can also be used to capture 360 degree videos, and can be viewed on Alphabet’s YouTube or by using a virtual reality headset.

However, that’s not all. The most significant competitor of GoPro is Yi Technology, a company that sells its products and uses an identical technology as used in GoPro’s high-end devices for approximately half the price.

Throughout the past year, the company’s product launches suggested that it has no clear long-term strategy regarding its cameras. In spite of introducing big flagship cameras throughout the holiday quarter previous year, GoPro introduced three cameras during the year comprising, Hero+ LCD, Hero+, and the high-end Hero 4 Session, to even out sales as well as to appeal more customers.

However, the mid-range cameras cannibalized the company’s higher-end cameras Hero 4 Silver and Black. Later, in April, the company terminated its three low to mid-range devices to halt cannibalization. This clearly suggests that the company’s attempt to appeal more mainstream to customers was botched.

Although GoPro’s falling sales performed better than the analysts’ estimates, GoPro is still in a lot of trouble. Growing competition will undoubtedly hurt the company going forward and this one-off quarter shouldn’t be taken on a positive note. In my opinion, investors should use GoPro’s recent rally to exit the stock.
Published on Aug 10, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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