GoPro (GPRO) Stock: All This Hype Is Dangerous!

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GoPro Inc (NASDAQ: GPRO)

GoPro has had an incredible time in the market recently, and for good reason. Just ahead of the holiday season, the company unveiled two new products, exciting investors in a big way. However, all of this excitement is leading to dangerous movement in the stock. Today, we’ll talk about why I believe that with every penny increase in the stock price comes more risk with GPRO.

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Why All Of The Excitement Surrounding GPRO

While I will say that I understand why the excitement is happening, I will also say that understandable is not synonymous with justified! The reason for the gains is relatively simple. Recently GoPro held an event where it unveiled the latest in it’s line of technology. The unveiling included the Hero 5, the latest extreme action camera, and the Karma, the company’s first drone.

While investors understand that there are likely to be headwinds in the extreme action camera sector, they are incredibly excited about drones. Many believe that the Karma will be the drone that brings GPRO back to life. As a result, investors are pushing the stock upward.

The Company’s History Says These Gains Are Dangerous

If GPRO had a strong history of being able to sell out of its products, sure, I would be excited too. However, that’s not the case at all. The truth is that the company entered the extreme action camera niche as the only player on the field. As a result they didn’t have to take part in much marketing. After all, as the only option, the old “If you build it they will come” myth comes back to life.

However, as time went on, competitors started to get into the industry causing big issues for GoPro. It was at this point that the company would have to prove that it knew how to market its products as a premium brand that’s well worth the higher cost over competition. Unfortunately, the company failed miserably! Sales of the extreme action cameras hit a plateau and investors started to drop the stock like it was on fire in their hands.

While we’ve seen some marketing since, the company is still dealing with the same problem. As a result, they looked to drones as a solution. However, there’s a problem with this solution – a big problem. The GPRO drone – the Karma – costs $799 and does not come with a camera!

Comparable versions, like the DJI Phantom (the current market leader), start at around $500 and come with a great camera. So, essentially, with the Karma, GPRO has done the same thing as it did with the Hero. It has created a very expensive product that it likely does not know how to market. What’s more, the company doesn’t have the advantage of being the only player on the field when the first product in the line launches – like it did with extreme action cameras.

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The Bottom Line Here

The bottom line here is that I understand the excitement. The new products are pretty impressive, and, in the short run, they are likely to continue pushing the value of the stock upward. However, if you’re going to jump in on the trends here, make sure to move with caution. Given GoPro’s history of creating a great product and matching it with an inability to reach sales goals, when the first sales reports are released, we can expect to see declines.

What Do You Think?

Where do you think GPRO is headed? Join the discussion at StockTwits, Twitter, Facebook, or Google+!

[Image Courtesy of Pexels]

1 COMMENT

  1. I see the market for GoPro products getting pretty saturated in the next couple of years (if it isn’t already). To me, the company is too niche focused to demand the high valuations it is currently seeing. I’m staying away with a 40 foot pole on this one!

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