What is the future trajectory for GoPro?

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GoPro (NASDAQ:GPRO) has managed to reach $1 Billion USD in annual revenues despite many skeptics labeling the product as either niche or outright fad. It is clear the GoPro cameras fill a niche in the documenting of extreme sports and active outdoor activity. It is not clear whether or not this niche will remain available or competitive indefinitely or if it can be expanded.

Go Pro Hero 3 (GPRO)

Go Pro Hero 3 (GPRO)

 

GoPro has two extreme trajectories:

  1. The imminent threat to GoPro’s business is the development and commercial release of a Google Glass-type products that makes a mounted camera device redundant for the user. Just like the camera itself has been eliminated by the smartphone long term this risk exists. These devices are likely 12-24 months or more away from any kind of commercial release. Moreover, public revulsion to initial tests of Google Glass are likely to delay commercial adoption of a “GoPro killer” wearable headset. However, just as camera phone technology cannibalized the digital camera market, GoPro faces the threat of being made technologically irrelevant by innovation and being labeled as “just” a video camera. In this situation, GoPro never becomes a mainstream product and even it’s niche market is ultimately challenged and colonized by innovative new wearable devices. Revenue growth will slow significantly and ultimately go into decline. A recent potential foreshadowing of GoPro’s worst case outcome would be the rise and fall of the Flip video cameras which were bought by Cisco but shut down in 2011.
  2. GoPro successfully sells their product to the mainstream as GoPros are adopted and encouraged by a number of industries including insurance companies who insist drivers install them in their vehicles in order to have video footage of incidents that require claims. Additionally, GoPro continues to target professional users in the entertainment industry. Imagine every NFL quarterback with a live streaming GoPro in their helmet during game day. This allows GoPro to use media and entertainment as a branding platform to launch their own “self-capture” media content produced by professionals as well as crowd-sourced from users. In this case, as GoPro created their technological space with their wearable cameras, they create a new media space of self-generated self-captured entertainment that not only drives additional sales but generates new revenues in the form of advertising. The market appears to be favoring this outcome in present share values. Additional upside exists if GoPro establishes itself as a brand, and creates other products targeted towards these niches.

Notes on the balance sheet, cash flow and income statement as well as specific lines to monitor as part of future due diligence

The future is all about sales, growth rate and margins. GoPro is growing at a stunning rate of nearly 100% per year. At some point soon, that growth rate will likely slow dramatically. But, how soon and by how much? It entirely depends on GoPro’s ability to drive exposure of their brand and convince consumers who might never have considered purchasing a GoPro to go ahead and purchase.

GoPro may remain a niche product for extreme sports and a mainstream fad, or it can create a new media category. This analysts thinks the GoPro is over-hyped as a product and the daily utility just does not exist for the vast majority of consumers who are unlikely to purchase the product. Whether they can become a media brand and last longer remains to be seen.

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