GoPro's (NASDAQ:GPRO) Karma may be facing production or supply issues -- there are reports of the initial shipment dates for the drone being pushed back to mid-November. The company previously claimed that the Karma, which was unveiled in September, would start shipping in late October.
Since GoPro already delayed the Karma's launch once in May, many investors are likely worried that the shipping delays could hurt its holiday sales. But before jumping to conclusions, let's see how the bulls and bears might interpret the situation.
If the glass is half full...
First and foremost, investors should remember that shipping delays aren't uncommon, and might merely reflect robust demand for the Karma. Manufacturing a smaller first batch of drones for the holidays is also wiser than producing too many devices and causing inventories to soar. GoPro already used big discounts to reduce bloated inventories of last year's Hero 4 Session, and it's probably wary of making the same mistake.
GoPro also isn't the only drone maker facing shipping delays. DJI's Mavic Pro, widely expected to be the Karma's fiercest rival this holiday season, has also seen its initial shipments delayed from mid-October to mid-November. DJI attributes that delay to "amazingly strong global demand", while GoPro has stayed silent on the matter. Therefore, the delay could merely be caused by a temporary shortage of components instead of any major hiccups or disputes with suppliers and retailers.
If the glass is half empty...
Unfortunately, GoPro has also had a bad track record with product delays. Back in May, GoPro CEO Nick Woodman admitted that he didn't think that the drone would be delayed until about a week before the conference call. The delay hinted at a big communication problem between GoPro's management, its drone design team, and its suppliers.
The 16-camera Odyssey rig, which GoPro co-developed with Alphabet, was also plagued by months of delays before finally shipping this May. The $15,000 device was originally introduced 12 months earlier.
Back in January, Woodman declared that GoPro would launch a stand-alone 360-degree camera for mainstream consumers, which would presumably be similar to Samsung's Gear 360. However, we still haven't heard anything about that camera, and many comparable devices have already saturated that market.
Lastly, its Hero 5 launch was recently dampened by a pricing dispute with Amazon, which caused GoPro to temporarily halt sales through the e-commerce giant.
With that track record, I wouldn't be surprised if the Karma arrives much later than GoPro intended. DJI also faces delays, but if it gets some test units into some important distribution channels, it could steal the Karma's thunder pretty quickly.
Why the Karma matters so much to GoPro
GoPro's quarterly sales have fallen annually for three consecutive quarters. Sales are expected to fall again in the third quarter before rebounding by about 55% during the crucial holiday quarter. GoPro expects that robust growth, fueled by strong Hero 5 and Karma sales, to lift its bottom line back into the black after four straight quarterly losses.
GoPro's fourth quarter started on Oct. 1. This means that we're already a month into the holiday quarter, with Hero 5 sales hobbled by the Amazon conflict and the Karma facing potential delays.
But investors shouldn't panic just yet. Oppenheimer analyst Andrew Uerkwitz recently reminded investors that sales were usually slower in September and October, as shoppers "gear up for the holiday season" in November and December. So as long as GoPro clears up the pricing and shipping issues with the Hero 5 and Karma in a timely manner, the company still has a decent chance of hitting its holiday sales target.