Fitbit v GoPro: faster, faster
Fitness trackers are beating action cameras, but Chinese rivals and Apple could be decisive
Both record your athletic exploits (or lack thereof). Both feature on this year’s Christmas lists. And both are electronics manufacturers that had initial public offerings in the past 18 months. So far, Fitbit, maker of movement tracking devices, and GoPro, maker of action cameras, are aligned. Nor are their revenues all that different: Fitbit had sales of $1.5bn in the past 12 months; GoPro’s were $1.8bn. Gross margins? GoPro’s stand at 46.7 per cent; Fitbit’s at 47.7 per cent.
Then they diverge. In terms of release schedule, it is Fitbit that looks to be struggling to stay with the pace. It entered the holiday season without a new gizmo in its product line-up: the latest model was released in January. But GoPro is sweating more heavily. It cut the price of its new Hero4 Session camera from $399 in July and $299 in September to $199 earlier this month. The company’s margin discount to Fitbit is only likely to widen.
The market has reacted to the varied performance. Fitbit is one of the most successful recent tech IPOs: its shares are up 50 per cent from its offer price, albeit they been much higher since the flotation. GoPro in contrast has fallen 20 per cent from its offer price and more than three quarters from its high last year. Fitbit’s enterprise value is about four times forward revenues, GoPro’s just above one times.
A gap is justified but this one looks too wide. Both companies are on the treadmill of developing new winners while seeing off increasingly vigorous competition. Occupying their narrow niches, they lack diversification to smooth out any bumps. GoPro does have one promised pivot: shifting to camera-equipped drones. But China’s DJI already makes room for a camera in its popular Phantom drone. Fitbit is not immune to Chinese competition: Xiaomi, whose fitness tracking devices sell for a fraction of the cost, could take advantage of better distribution in the US and Europe.
Then there is the Apple factor. For Fitbit, Apple is most likely to be a competitive threat — perhaps with a cheaper or more attractive version of its watch. GoPro, however, saw its shares jump 16 per cent this week on speculation that Apple could mount a takeover bid. This is one area GoPro would not have to discount: its market capitalisation of $2.6bn is spare change for the richest company on earth.