Having lost more than four-fifths of its value in two years, GoPro Inc (NASDAQ: GPRO ) stock could use either a hero or good karma. Fortunately, GoPro stock is about to get both.
On Sept. 19, the wearable live-action camera innovator will unveil its latest creations - the Karma and the Hero 5. The latter is simply its newest live-action camera, an upgrade over its current Hero 4 cameras; the former is the company's first-ever drone, allowing consumers to take overhead videos and photos from just about anywhere.
The Karma could be a game-changer for GoPro, which has seen slipping sales and plummeting share price since its disastrous Session camera debut last year. GoPro stock has fallen 78% during that time, and it is off nearly 85% from its $87 peak in September 2014, three months after its much-hyped IPO. Since then, the company has fallen into the same trap as Tim Cook-era Apple Inc. (NASDAQ: AAPL ) - it keeps rolling out slightly upgraded versions of the same product .
But the Karma is truly something new - a small, silent, maneuverable drone that should compete with DJI's Phantom 4 drone and Parrot's Bebop drone. We won't know until the Sept. 19 how GoPro's drone compares to those industry leaders in terms of its capabilities or its price tag. What we do know is that the Karma has the potential to be a whole new revenue stream for a company that desperately needs it.
Karma, Hero 5 Will Boost GPRO Sales
GoPro's sales have declined by at least 30% for three straight quarters, a startling departure from the previous six quarters of no less than 38% growth. That shows you just how unpopular the Hero 4 Session is; sales of its latest camera were so bad, in fact, that GoPro had to slash the price in half (from $399 to $199), six months after the product hit shelves last July.
So the Hero 5 will also be a welcome change. Combined with the Karma drone, GoPro's latest products are set to return to its pre-Session growth - sales are expected to increase 54% next quarter, and 22% next year. Profits should remain elusive, but the $0.35 drop in earnings-per-share the company expects in 2017 would pale in comparison to this year's estimated loss of $1.08.
As for GoPro stock, it has already been showing signs of life in the last few months. GPRO stock is up more than 50% since bottoming below $9 in May, even after dipping from $15 to $13 in the last month. Currently bumping up against its 50- and 200-day moving lines, I expect GPRO to hold those lines - the 50-day moving average has acted as support since early July - until the Sept. 19 product announcement. In fact, I expect momentum in GoPro stock to build next week in anticipation of the Karma/Hero 5 unveiling.
Buy GoPro Stock Before Product Release
There's no getting around it: GPRO has been a disaster since its 2014 IPO. But so was Facebook Inc (NASDAQ: FB ) in its first year of trading. Netflix, Inc. (NASDAQ: NFLX ) had a rough patch after it raised prices in 2011. If you had bought those stocks after their early collapses, you'd be sitting on a monster return today.
GoPro isn't Facebook or Netflix. It's still something of a one-trick pony, but the Karma drone is the first step toward altering that narrative. And I like the long-term potential, starting next quarter. Having been beaten to a pulp over the last two years, there's very little downside risk in GPRO, assuming the new products aren't a complete flop.
My advice: buy GoPro stock today, before the Karma and Hero 5 launch.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
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