GoPro – Needs a hero

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GoPro must make the ecosystem its top priority.

• I think that GoPro will soon begin to really struggle as the hardware element of its product becomes less and less relevant.
• The outlook for GoPro is exactly the same as it is for almost every other seller of consumer electronics: execute on the ecosystem or be commoditised by Asia.
• There is no doubt that GoPro makes fantastic cameras and its ability to cram 4K video with good frame rates and storage into such a small package and still have good battery life is second to none.
• However, the competition is not standing still and inexorably it will close the gap on GoPro and erode the hardware advantage away.
• This combined with a slowing market for its products means that GoPro has to find another way to engage with its users to ensure that they will always buy a GoPro product and that they will pay a premium for them.
• This means that GoPro must focus on the user experience and the services that it offers with its cameras and it must enter the ecosystem.
• Most users shoot far more video and take far more pictures than they will ever use and smart software that can help the user sort through and keep the good stuff will add value.
• Furthermore, there is a lot that can be done in the cloud and around building a community to which users want to belong and engage with.
• Unfortunately, I think that GoPro has neglected to really focus on these areas and now finds itself behind the curve when it comes to creating an easy and fun to use experience.
• I also worry that GoPro has not really internalised how important the ecosystem is to maintaining its brand equity, user preference and most important of all margins.
• It is still not too late as its hardware is still far ahead, but I would be looking to see real focus on and improvement in the user experience and in the community before the end of 2016.
• In the meantime, the outlook is pretty tough with demand unlikely to live up to the 15% growth predicted by the consensus estimate.
• Fortunately, GoPro’s PER multiple is now at a much more reasonable level in the mid-teens but if there is no growth in 2016, it could fall further.
• It is at this point that it could become an acquisition target and I could see Google or Sony considering on picking up GoPro at a bargain price.
• I think it much less likely that Apple will buy it.