After having a terrible start to the year, shares of GoPro (GPRO, Financial) have finally started recovering. The stock is up almost 30% from its all-time lows. The recent recovery may proved to be short lived, however, and investors should not initiate a position in the stock just yet.
Sales may have peaked
It is very clear that GoPro's main business comes from selling cameras to customers. The company sells its products online or through distributors. Both ways help the company to grow at a rapid pace. Since 2010, the company has sold around 20 million cameras.
GoPro’s camera sales managed to grow in the previous year, but the speed of growth is decelerating. As the business becomes huge, super-fast growth cannot be achieved very easily.
The decline in the growth rate delivers one significant signal to investors, which is that the company’s business is maturing. This year the company will try to sell cameras to two kinds of customers: one who already has a GoPro camera and would prefer upgrading to the latest model, and others who do not own a GoPro camera and would like to get one. Keeping in mind this type of maturity in the business, it is very likely that company will continue to move forward, but at a much slower rate.
GoPro’s innovative Odyssey
The video trend is shifting toward virtual reality and 360-degree video. These two ideas have attracted a wide audience, but both the concepts are still abstract to many customers. With time, that’s about to transform.
GoPro is taking various steps to adopt this evolution, as it is working with Google Jump to introduce a 16-camera rig for shooting 360-degree, videos and 3D photos. All the content can be downloaded and merged into a single video or photo that can even be uploaded to YouTube.
The best thing about the GoPro Odyssey is that it could be the product to drive sales along with its promises to craft a new level of content sales. As per the preliminary reports, the system will be available in the market for around $15,000, but in the future, rates are bound to drop. GoPro’s lowest priced camera is available for $199; therefore; 16 of those cameras purchased individually will cost $3,184. If skilled moviemakers find a use of this 360-degree camera, this could be a huge boost to sales.
Conclusion
While GoPro’s Odyssey may boost sales in the future, the company’s primary business is maturing a lot sooner than many expected. With camera sales slowing down, I think investors should avoid GoPro despite its low share price.
