GPRO stock has been trading within a narrow range over the past couple of months. Let’s review the business performance of GoPro Inc (NASDAQ:GPRO) to see what’s going on.
Business Analysis
GoPro has managed to be in lead in the camera market along with maintaining its brand image as a highly regarded one, but GoPro stock has not had the same fate, becoming a beaten-down stock.
While GPRO stock started trading in June 2014 at $24 and had reached over $94 by October of the same year, it is currently trading at a range of $5.50. The market is accustomed to the company’s life-time low priced stock and very little hopeful news; however, the coming period seems to be bringing about a change. The company’s reported Q3 revenue of $243 million was an increase of 20% year-over-year due to the increased demand for the HERO7 Black camera. The company also narrowed down its operating expenses while having a sales boost of 11% and the company’s net loss decreased to $10.2 million.
While GoPro’s plan for building a media empire didn’t work out, the company is exploring business outside the hardware market—mostly through its $5 GoPro Plus subscription.
GoPro Plus provides things like unlimited cloud storage space, a no-questions-asked exchange policy for damaged cameras, and a 50% discount on all accessories through the company’s online store. GoPro Plus subscriptions went up by 10% in the first quarter, and a 50% year-over-year increase to 220,000 members was reported. The company would be able to generate annual sales of an additional $13 million from these new subscribers, provided those subscribers stay actively subscribed it for the entire year.
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At the time of writing, GPRO stock is trading higher by 3% at $5.56.
However, the lack of real media component makes it difficult for the GoPro Plus subscription service to actually soar as high as it could. Some are concerned that the 50% discount on accessories could cause harm to category performance. The chances of customers subscribing to the service and making use of the discount available or the replacement facility aren’t great, while the chance for unsubscribing is high.
The scope for GoPro’s growth in the traditional video space is fairly scarce, so the company’s hope rests with new product categories like 360-degree or panoramic cameras. These currently are the core product offered by the company with facilities of capturing full-rage video along with viewing the ranges that can be rotated even during playback.
The demand for virtual reality and augmented reality could spark the market’s interest in panoramic cameras as well. The growth of these categories of products in the market is slow, however. Further, the company faces increased competition from companies like Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), and Apple (NASDAQ:AAPL) in the emerging markets, putting GoPro in a tight spot.
The GPRO stock currently is valued at 0.7 times the expected sales. The scope provided by panoramic cameras and 360-degree cameras could turn things around for the company; however, the definite outlook on the company’s growth remains unclear. Investing in GPRO stock could be quite a risky venture.
Featured image: DepositPhotos © peshkova
