Shredded GoPro Finally Looks Like a Deal
Struggles to sell its newest camera are already reflected in its stock
In consumer electronics, going smaller and simpler is typically a no-brainer. But at GoPro, it has caused a bit of head scratching.
Best known for its line of small, high-definition action cameras, GoPro tweaked its winning formula with the launch of the Hero4 Session in July. The $400 camera is about the size of an ice cube and features only one button. The idea: make an ultraportable camera easy to use at a moment’s notice.
But that selling point hasn’t proved an easy sale. At an investment conference last week, finance chief Jack Lazar said the Session has had a “difficult” time competing with GoPro’s more popular Hero4 Black and Silver cameras.
That could set up a more challenging fourth quarter, which typically accounts for more than 40% of GoPro’s annual sales. Mr. Lazar said the company plans to expend more on marketing the Session, which could lift operating expenses. GoPro also could cut its price. In addition, guidance earlier this month from GoPro’s main chip supplier, Ambarella, suggests there isn’t another major camera launch planned this year.
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Still, challenges selling a new device are hardly a death knell for a profitable company that has sold about 6.5 million cameras in the trailing 12-month period, up 64% year over year. Jeremy David of Citigroup estimates GoPro’s total addressable market is approaching $20 billion, more than 10 times its current run rate.
And while GoPro’s cameras may not be a bargain, its stock is suddenly looking like more of one after falling by half in a month. That puts its once lofty forward earnings multiple at a more respectable 16 times.
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At that level, it is easier to picture the shares in a portfolio.