GoPro (NASDAQ:GPRO) went public just three years ago, but it's already running out of room to grow. The action camera maker's revenue rose 41% in 2014 and 16% in 2015, but fell 27% in 2016. That slowdown was mainly caused by waning demand for action cameras and competitors flooding the market with cheaper devices.
Analysts expect GoPro's sales to rebound 13% this year, but that recovery is highly dependent on the company's new products and services locking in old customers while luring in new ones. Let's see if those efforts can save the ailing camera maker, which has lost 90% of its market value since peaking in Oct. 2014.
The Karma drone and Karma Grip
GoPro recently expanded its product lineup with the Karma, a portable drone, and the Karma Grip, a handheld motorized stabilizer for GoPro cameras. Both products face tough competition from DJI Innovations, the world's biggest drone maker.
Last year, the Karma drone fared poorly in head-to-head comparisons against DJI's foldable Mavic Pro, which was lighter, smaller, cheaper, and had a longer-lasting battery. DJI also recently introduced the new Spark drone, a tiny soda can-sized drone which nearly matches the Karma's specs for about half the price.
The Karma also faced an embarrassing recall last year after some units lost power in mid-flight. To compensate for the recall during last year's holiday season, GoPro launched the Karma Grip (previously part of the Karma drone kit) as a stand-alone device. But once again, DJI had previously launched a similar handheld stabilizer, the Osmo, back in 2015. DJI even introduced a stabilizer for smartphone cameras last September.
The Fusion camera
Back in April, GoPro introduced the Fusion, a stand-alone 360-degree camera for capturing panoramic photos and videos for YouTube, VR headsets, and other platforms. However, plenty of other devices -- including Samsung's (NASDAQOTH:SSNLF) Gear 360, Ricoh's Theta, and Kodak's SP360 cameras -- already do the same thing.
Garmin (NASDAQ:GRMN) also recently introduced the VIRB 360, a similar device which adds an "augmented reality" digital overlay for motion-related stats like speed, altitude, and distance traveled.
All these rival cameras can be purchased now, but GoPro plans to run a summer pilot program before pricing the device or announcing its launch date. That delay could hurt the Fusion, since outdoor enthusiasts could already be shopping for a 360-degree camera to capture their summer activities.
The Hero 6
One of GoPro's biggest mistakes in 2015 was launching the pricey Hero 4 Session and a few cheaper Hero-branded cameras instead of the Hero 5. That move, which was intended to reach more mainstream consumers, backfired and alienated core customers, who had expected a new flagship device.
GoPro doesn't plan to let that happen again. It discontinued its cheaper devices last year, repositioned the Session as its entry-level device, and launched the Hero 5 on schedule before the holidays. GoPro plans to stick with that schedule this year, with CEO Nick Woodman announcing that the company would release the Hero 6 later this year. If GoPro continues its current "trade up" program for older cameras with the Hero 6, it might convince more users to finally upgrade their aging devices.
Woodman didn't provide any additional details about the Hero 6, but rumors suggest that the device could include some VR or spherical features to complement the Fusion. It will also likely include the same cloud and app connectivity features as the Hero 5. Recent rumors suggesting that GoPro could tap Qualcomm to supply SoCs instead of its longtime supplier Ambarella indicate that the Hero 6 may have a stand-alone 4G connection, which would reduce its dependence on tethered smartphones.
The expansion of its software ecosystem
To expand its software ecosystem, GoPro will likely offer tighter integration of its cloud backup platform GoPro Plus, which costs $5 per month, with its Quik and Capture editing apps. This could help GoPro address common criticisms that its software backup and editing solutions aren't as elegant or streamlined as comparable solutions for smartphones.
GoPro Plus won't likely become a major revenue stream for the company anytime soon, but it could complement its trade-up plan by locking in users. If the VR market takes off, we could see an expansion of Kolor, the video-stitching app it acquired in 2015. A more expansive software ecosystem with easier-to-use APIs could also fuel new partnerships, like its existing ones with Twitter's Periscope and BMW's Laptimer app.
The road ahead
2017 will be a make-or-break year for GoPro. It might post a turnaround if new products like the Karma, Fusion, and Hero 6 boost its revenue growth. But if they fail to widen its moat against rivals like DJI, Garmin, and Samsung, the stock could still fall much further before the year ends.
Leo Sun owns shares of QCOM. The Motley Fool owns shares of and recommends AMBA, GoPro, QCOM and TWTR. The Motley Fool has the following options: short January 2019 $12 calls on GoPro and long January 2019 $12 puts on GoPro. The Motley Fool has a disclosure policy.