There is one common feature that unites millions of sports professionals and enthusiasts around the world: GoPro (NASDAQ: GPRO) cameras. Tiny devices strapped to chests, helmets, or bike frames enabled the tsunami of videos GoPro users create and publish online. Viewers can almost feel as they are the ones riding a bike or driving a sports car. First person perspective at its best. Yet, despite its almost defacto position in sporting or active leisure sectors, it hasn’t been able to pick up its pace since 2016. GoPro’s stock hasn’t seen any growth for nearly four years, even despite its recent success with the growth in revenue. Can the company reinvent itself and show more promising future?
In 3 month ending June 2020, the company’s revenue dropped by 54.1% from $292.49 million to $134.26 million to and the gross margin dropped from 34.9% to 30.3%. No doubt Covid-19 had a strong impact to the company’s performance, as people had fewer opportunities for active leisure while majority of sporting events were also cancelled.
However, it’s not the pandemic that is the main cause for concerns. The company has been losing its market share to cell phones, where innovation is extremely rapid, and the quality of photos and videos is already high enough to satisfy most non-professional users.
The company attempted to capture the drone market; however, first attempts weren’t successful, and it withdrew itself from the market. This showed company’s limited capabilities to launch new products in different markets, especially knowing the potential of the drone market, where main players such as DJI or Parrot had been going from strength to strength.
Another problem is that the market size for GoPro devices is somewhat limited. It’s a niche segment with multiple market players having much larger budgets, such as Olympus (TYO: 7733),Sony (TYO: 6758),and others.
It has recently launched live streaming service, hoping to attract more subscribers to its GoPro Plus service. It remains to be seen whether it will have meaningful impact to its customer base. The current subscription pricing model is also questionable: $4.99 for unlimited storage of mostly large files and resource intensive streaming may not generate high margins, unless much greater scale is achieved. GoPro also launched lifestyle gear line, including bags, apparel and accessories. This is a logical step and supplements its current line of products and may attract some of its most dedicated fans.
The company is in a difficult position and doesn’t seem to be moving fast enough. It has been a few years since it figured out that there only so many bike riders and surfers willing to put its cameras on, however the pace at which new options are explored and products developed is way too slow. The most likely outcome for the company is that it will always remain a niche player within active leisure sector.
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