Investors Are Worrying About GoPro For All The Wrong Reasons

GoPro shares are taking a hit (down 6% to start the week) after Barron’s magazine published a report stating the company’s stock is likely to fall to $25 a share in the very close future (this would equate to a 29% decline from Friday’s closing price of $35.15).

As some publications have noted, this is a 44% year-to-date decline.

So, what’s keeping all these investors up at night? Competition from Apple, apparently.

From the report…

While analysts are bullish, investors are clearly skittish about the company’s ability to ward off competition, notably from Apple (AAPL). At least twice in the past nine months, GoPro shares have tumbled on Apple-related news. In January, the mere issuance of a camera-related patent to Apple sent GoPro shares down 12%.

Even seemingly positive news from Apple has been overlooked. At the company’s keynote address a few weeks ago, it added GoPro support to its Apple Watch, enabling the watch to serve as a viewfinder for GoPro cameras. But Apple also upgraded the camera in its iPhone to a 12-megapixel sensor capable of producing high-resolution 4K video. GoPro shares tumbled 10% on the news.

From someone who knows GoPro’s products inside out, this fear is completely unfounded.

iPhone cameras, no matter how good, is not and will never be a threat to GoPro’s product offerings. People who have the need to buy a GoPro camera will not use an iPhone camera as a substitute for what they’re going to do with the GoPro.

The two products, quite simply, do not overlap.

I’ve long said that the GoPro is a magical product: it’s one of the very few products in the consumer technology world that markets itself. Whenever someone posts a video of them skydiving or snorkeling, people automatically assume that they used a GoPro to film the video. No one is thinking: oh, he/she must’ve used an iPhone with one of those ugly and chunky waterproof cases!

Truth be told, those who fear that GoPro’s sales are going to sink because of the introduction of another camera (even one made by Apple) should be worried that Canon, Nikon, etc. are also producing cameras. What they fail to understand is that in the camera market, while Apple could be cannibalizing Canon/Nikon/etc.’s marketshare, it’ll be difficult for them to reach GoPro’s niche audience: people who intentionally put their camera in harm’s way and/or routinely use it in rough terrains, trusting that their GoPro will hold up. No one uses their iPhones in those same exact situations knowing 100% that the iPhone is going to hold up perfectly.

While nothing about GoPro’s offerings are exclusive or proprietary to the company, it benefits from FMA (first-mover advantage) and a cult-like following, none of which are easily replicable by other companies seeking to build a competing product to GoPro’s offerings.

But of course, no good story is without a kicker, and here’s Barron’s…

“Saying smartphones will replace [GoPro] is like saying the Army will someday replace tanks with sedans,” tech site Gizmodo argued.

It’s actually a revealing metaphor, when you consider that the family sedan has been replaced by do-everything sport utility vehicles. In that sense, smartphones are following an SUV-like evolution. And GoPro runs the risk of being driven off the road.

True, except most roads don’t just have a single lane. They have multiple, with the ability to accommodate all sorts of vehicles.

And I suspect that GoPro’s investors — especially the ones who truly understand the company — know that.