Comparison of GoPro and Apple stocks over the past month. by jwints on TradingView.com
Action camera company GoPro is going to have to “innovate like hell” if it wants to survive a potential marketing war with one of the largest companies in the world.
The company’s stock price took a major hit, dropping 12 per cent two weeks ago when news broke that Apple Inc. had filed patents for wearable, remote-controlled cameras similar to the ubiquitous sports action cams that GoPro is known for.
“Because it’s a small company that’s living on its innovation, GoPro’s got to try and innovate like hell or else it just dies,” said business analyst and Carleton University professor David Cray.
It might be doing just that. Last week GoPro announced that it is partnering with the NHL to provide the players’ point of view in real time on the ice. That constitutes a major breakthrough for the company’s technology, which so far hasn’t included live high definition video streaming.
Cray says the NHL partnership announcement was likely timed to reassure GoPro investors that the company still has lots of fight left in it.
“They’re probably also doing something else,” Cray said. “GoPro might be saying ‘Look, we’re still out ahead in this race so if you want to buy us it’s going to cost you a lot of money’”.
“That happens a lot, especially with technology companies. At first it’s sort of ‘Hey, we’re the rebels, we’re going up against Google and Microsoft and whatever,’ but then somebody comes along with a fistful of money and the implicit threat that if you don’t sell us your technology we’re going to hammer you,” he said.
Neither GoPro nor Apple returned requests for comment. Both companies have remained tight-lipped about the potential camera showdown.
The battle for action cam supremacy looks to be a David-and-Goliath dual. Apple is 241 times bigger than GoPro, pulling in $18 billion in profit last quarter alone compared to GoPro’s $14 million.
But when it comes to research and development, GoPro out-spends Apple five-to-one as a percentage of each company’s profits.
Right now, GoPro controls almost the entire action-camera market, in part through aggressive marketing strategies. It’s cameras have put viewers in the cockpit of fighter planes, provided a literal eagle’s eye view of base-jumpers and documented the world’s highest-ever skydive by Felix Baumgartner in 2012.
The patents Apple filed make specific mention of GoPro cameras, prompting speculation that the company isn’t just entering the wearable-camera market; it intends to take direct aim at GoPro much like it did when it took over the smartphone market from Blackberry with the first iPhone 2007.
If GoPro is going to avoid a similar fate, it needs to keep setting the action-camera agenda, Cray said. And that means not only keeping up on the R&D front, but also the marketing side of things.
With that in mind, a look at GoPro’s latest quarterly results should reassure investors, Cray said.
Last quarter, the company plowed 89 per cent of its profits back into operating costs, which have almost doubled since last year. That might seem worrying, but the it’s because the company is taking on a lot of new staff, something Cray said is a sign GoPro intends to step up the fight.
Since first going public in June, the company’s stock price has doubled, and aside from the hiccup over the Apple announcement, it has continued its upward trend.
But if it comes down to a battle for the action camera market, Cray said GoPro’s chances of holding off the Apple juggernaut are slim at best, no matter how innovative it is.