Goldman Sachs voiced optimism for the lower initial price for the Hero5 Black. Previously, when GoPro's stock traded higher ahead of the Hero 4 release, GoPro turned off buyers with its high price. This time, the action camera is $50 less. This move should spur existing customers to upgrade. The new features are also practical enough that chances are good customers will open their wallet. Hero5 has a 2-inch touch-screen, a GPS, and a 12-megapixel sensor. One drawback is the unit records at 4K at 30 frames per second, instead of 60 fps.
The Hero5 supports voice command and is waterproof. This will distance the product's superior quality over cheap China-made copies. Athletes and active people will pick the GoPro over the inexpensive clones.
Karma drone shakes market
Markets should expect GoPro's Karma drone selling well during the holidays. The device looks easy to use, has a 3-axis stabilizer, and is cheaper than drones on the market today. GoPro's differentiation from other drone suppliers is the carrying case is portable. Commercial UAV cases are often massive and difficult to carry around.
GoPro's Karma is also drastically cheaper than drones available today. A drone that records at 4K and has a 12MP camera will cost at least $1,460 today on Amazon.com. GoPro is selling the Hero5 and drone bundle for $1,099. The bundle that includes a Hero5 Session costs $999. The company is clearly offering value for its consumer base, a move that should drive higher sales in the quarters ahead.
Though the flight time for drones is always a challenge, Karma will stay in the air for 20 minutes. The recharging time is around one hour. Note that GoPro left out "follow me," a move that was probably done to keep prices down.
Valuation
Bears are justifiably skeptical on GoPro's lofty valuations. The company, although it has no debt, trades at over four times book. Revenue growth peaked in fiscal 2012, and fell steadily since. By fiscal 2015, revenue grew just 16 percent. EBITDA margin fell from 11 percent to 5.2 percent in that time. GoPro needs the triple product refresh of Hero5 Black, Hero5 Session, and Karma to reinvigorate sales. At the lower product prices points, chances are good GoPro will succeed.
Takeaway
Short-selling GoPro makes no sense at this time. Previously, betting against fad stocks paid off. Fitbit (NYSE:FIT) is facing a 54.75% short float, but its stock is up 46 percent from lows made earlier this year.
Etsy (NASDAQ:ETSY) bottomed, too, in February. I called its bottom a little after that, in April. The positive sentiment for GoPro will likely squeeze out shorts. As advertising and buzz take hold, sales for the new GoPro devices will rebound. That should bode well for the stock price.
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