Tech

Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

GoPro's deal with Red Bull hasn't give the company wings, as promised by the caffeinated drink-makers' slogan.

Sure, GoPro stock has gained about 9 percent since Tuesday, when it outlined a partnership that involves Red Bull taking a small stake  and collaborating on content production and product innovation. But it's still more than 40 percent lower than the last time I wrote about the camera maker in December. Then, I mentioned it could be a potential takeover target, a theory that's been helped by the market cap shrinking to just $1.4 billion.

Stock Skydive
Wall Street sees the camera-maker's shares being anywhere between $6.50 and $17 in the next 12 months.
Source: Bloomberg

But with no suitor in sight, the Californian company faces a challenge to convince consumers to buy its products. GoPro founder and CEO Nick Woodman explained this week how he hopes to do so, based on his belief that the current "visual expressionist period" or "habitual storytelling" zeitgeist is no passing fad. He expanded further (forgive the historical non-sequitur):

"Since humans first began carving drawings on walls of caves, they've shown that they like to express themselves visually and that the spoils go to the companies that can help people become better storytellers and more easily weave that process into their daily life flow and that's what we're focused on. And I think that the more that we make a GoPro feel like an extension of a smartphone, less a separate piece of hardware but more as though you just popped the lens out of a smartphone and you're able to put it in places you couldn't put this; that's our goal and that's how we become more relevant to the smartphone user... I think we're still in the first innings." 

Positioning the company as one that doesn't only capture but helps share content is a step in the right direction, and users have been lapping up its new video editing apps, Quik and Splice. The two -- which can be used on videos captured on smartphones and aren't exclusive to GoPro content -- are being downloaded at a combined 500,000 times per week according to Woodman.  

That's nice, but let's not forget GoPro is essentially a hardware company that relies on device sales. And there's little reason to assume that app users will trade up to its cameras and accessories -- especially those not into action sports or other such adventures.

Betting on a Fall
GoPro's Red Bull partnership did little to impress bearish investors, many of whom are actually betting against the stock.
Source: Markit, Bloomberg

There's another roadblock that GoPro should consider as it chases today's "storytellers". Videos edited by its apps can't be shared on Snapchat's stories feature, although they can be sent to friends on the network. Yet Snapchat user stories are fueling 10 billion video views a day, Bloomberg News reported last month, which is a lot of videos outside GoPro's clutches.

Still, users can share videos on Instagram, Facebook, WhatsApp, Twitter, YouTube and, as of January, stream them on Periscope

GoPro's problems, however, may extend deeper. The launch of its first drone, which could have given a jolt to sales, has been delayed until the end of the year so the company can fine tune "revolutionary features". The long wait could push consumers towards rivals like China's Xiaomi, which is pricing a new drone more than 20 percent below market leader DJI. 

Tough Sell
GoPro's quarterly revenue appears to have peaked, and although new products could bolster sales, investors won't see the broader impact until next year
Source: Bloomberg
*June 2016 and September 2016 quarters are estimated, not actual

Woodman said on Tuesday that the company would be "fitter, faster and stronger" heading into the fourth quarter than ever before, with updated hardware, accessories and software available for purchase or use.

But until we see the proof of that (next year at the earliest), its shares can't be expected to do much more than tread water. Not very compelling footage.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Less than 1 percent, according to GoPro founder and CEO Nick Woodman

  2. Two of those this week were by me, for the purposes of this column.

To contact the author of this story:
Gillian Tan in New York at gtan129@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net