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Osmo Action Could Put an End to the GoPro Stock Turnaround

Brad Moon

GoPro (NASDAQ:GPRO) has seen its stock rise over 70% in 2019 as the company works to recover from several disastrous years, including a failed attempt to enter the consumer drone market. In the past week, GoPro stock has notched impressive gains after better than expected Q1 financials and news the company was moving U.S.-bound camera production out of China to avoid tariffs.

GoPro stock gpro stock

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The China move was exciting for investors, however drones have come back to bite GoPro. Specifically, DJI the Chinese company that dominates the consumer drone market. Looking to expand beyond drones, on Wednesday DJI launched its own Osmo Action camera.

It’s priced lower than GoPro’s flagship HERO7 Black, it’s doing very well in reviews and outlets like The Verge are warning “GoPro should be worried.

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DJI Releases the Osmo Action Camera

At this point, China’s DJI is synonymous with consumer drones. Models like the Phantom and Mavic dominate consumer drone sales. And for years, DJI has been developing its own cameras to mount on those drones. Now the company is taking that camera expertise to a new market: action cameras.

On May 15 the company officially announced the new Osmo Action camera. The new $349 device offers 4K video recording at 60 fps, HDR, slo-mo video, electronic image stabilization, voice control, a rugged and waterproof design, live feed to a smartphone, included mounts for helmets and bikes, and a unique double-screen design for selfie composition.

The Osmo Action camera is clearly gunning for GoPro’s flagship HERO7 Black, and to make things interesting DJI undercut GoPro by $50.

Why GoPro Should be Worried

To GoPro, the new Osmo Action camera must feel a little Karmic. In 2016, with GoPro stock slumping and worries that smartphones would begin to supplant its action cameras, GoPro decided to diversity. It chose to enter the hot consumer drone market, and targeted market-leader DJI with its GoPro Karma drone

Of course, the Karma turned into a disaster. Weeks after launch the GoPro drones were falling out of the sky, resulting in a recall. The re-launched drone failed to make a dent against DJI — which released the lower priced Mavic drone in response — and GPRO ended up exiting the drone market, laying off staff, and focusing on a turnaround as GoPro stock hit record lows.

In its most recent quarter, GPRO was still reporting a loss, but revenue was up 20% year-over-year and margins were up to 33% from 22% the previous year. Much of this was on the back of its flagship HERO7 Black action camera.

GoPro says it captured 97% of all dollars spent on action cameras in the U.S. for the quarter. It shipped 842,000 cameras during the quarter (up 11%) and 85% of those were the HERO7 Black – which accounted for over 90% of the company’s action camera revenue.

Just like GoPro went after DJI’s drone business with the Karma, DJI is coming for GoPro with the Osmo Action camera. The launch has already had an impact on GoPro, with the company quickly discounting the HERO7 Black by $50. That’s going to cut into those margins. 

Reviews of the Osmo Action camera have been largely positive. DJI’s camera seems to be well positioned to take on the HERO7 Black and adds new features that DJI lacks — including the second screen for easier setup of selfie recording. It’s also compatible with most GoPro mounts, although DJI is including adhesive mounts in the box for attaching the camera to helmets, bikes and other surfaces.

At this point, GoPro stock hasn’t been impacted by the release of the Osmo Action camera. But if DJI has any success in breaking into the market, GPRO’s reliance on its action camera sales means the impressive 2019 GoPro stock recovery will be under threat.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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