GoPro (NASDAQ:GPRO) launched its first drone, the Karma, in late October, and the line is already being recalled.
In this episode segment from Industry Focus: Energy, Motley Fool analysts Dylan Lewis and Taylor Muckerman explain what went wrong, how GoPro is responding to the situation, and how the failure of this product will likely affect the company's sales in the next few quarters.
A full transcript follows the video.
This podcast was recorded on Nov. 17, 2016.
Dylan Lewis: GoPro is one of the names in the market that a lot of people were expecting big things from. They recently launched their Karma line in late October.
Taylor Muckerman: This is their first drone, right?
Lewis: Yes. This is their first attempt at a drone. And it didn't go so well, as it turns out. Earlier this month, they announced that they were recalling 2,500 units of the Karma drone. Sold for about $800 to $1,099, depending on which model you got. But, what was happening was, they were falling out of the sky. (laughs)
Muckerman: (laughs) Not quite the entrance to the market you want to make.
Lewis: Yeah. There were some power-failure issues. As a result, I think GoPro is smart to very proactively recall everything. You compare the way they handled it to the way that Samsung handled the exploding Galaxy Note 7s ... I think they were conservative, and that was good. But, obviously not the product launch that you want, especially heading into the holiday season, which is when consumer tech companies do the lion's share of their annual sales.
Muckerman: Yeah. And even leading up to this drone release, they had issued dour guidance for the fourth quarter, just on the camera market alone, which is what people probably recognize this company as, with their Hero series of virtually indestructible action cameras, then the online content management systems where you can edit videos, and GoPro can do whatever they want with your content, which might be the only feature of this business. So, looking at these drones now falling out of the sky, what are they doing? Are they giving people new drones? Are they just reimbursing folks? How are you going to recover from your first-ever drone failing?
Lewis: This is a full refund situation. They're not replacing units. I think part of the issue is they need to figure out what's going on.
Muckerman: Yeah, they might not have inventory to replace, either, because they're probably planning on selling what they have.
Lewis: Right. So, until they can address that issue and make sure that, on a technical side, everything is fine and we won't have those power-failure issues during operation, they're going to hold off on issuing anything new. Like I said, it's problematic for a business that's looking to make a huge splash during the holiday season.
Dylan Lewis has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GoPro. The Motley Fool has the following options: short January 2019 $12 calls on GoPro and long January 2019 $12 puts on GoPro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.