When GoPro (NASDAQ:GPRO) unveiled its new HERO 4 Session camera in July, it heralded the device as "the smallest, lightest, and most convenient GoPro, yet."
After all, the HERO4 Session is 50% smaller and 40% lighter than any of its predecessors, is waterproof out of the box, and features easy one-button control to make capturing high-quality video and pictures simpler than ever before. And with its initial retail price of $399 -- the same as GoPro's larger, albeit more full-featured, HERO4 Silver Edition, and $100 less than the top-of-the-line HERO4 Black -- HERO4 Session seemed like the perfect, high-margin complement to GoPro's broader camera lineup.
Too bad sales aren't living up to expectations.
In a press release introducing a new lower-cost $199 Hero+ camera last week, GoPro simultaneously reduced the MSRP of the HERO4 Session by $100 to a "more accessible price" of $299. Make no mistake: To do so less than three months after the Session's launch is an almost certain indication sales are trending below expectations.
The writing on the wall
Not that it should come as a big surprise. When asked at the 2015 TechCrunch Disrupt conference last month how the Session was selling, GoPro CEO Nick Woodman admitted, "It's going well, but it's not what we'd expect simply because of how strong Silver and Black are."
Woodman then elaborated,
What's interesting about this product is [...] it's selling against the best-selling cameras in the world, which thankfully are GoPros. And while sales would be phenomenal for any other company competing with us, it's showing us how strong the brand of the HERO4 Silver and Black family are. It's showing us how strong GoPro is. And even introducing something that's new, and convenient, and as exciting as this, it's a tough road to hoe against GoPro."
In other words, for all the engineering prowess that went into the HERO4 Session, sales of GoPro's newest device -- at least at its old price of $399 -- could only go so far when stacked up against its technically more capable, then-comparably priced big brothers.
On the surface that's fair enough. As Woodman pointed out, the best-selling cameras in the world are still, in fact, GoPro's most lucrative models. And considering the Black and Silver have consistently generated more than half of GoPro's total revenue since they were launched late last year, any incremental revenue boost from the Session should serve as a welcome source of diversification.
But at the same time, investors should tread carefully here. Depending on the gravity of the HERO4 Session's sales underperformance, GoPro could be facing a glut in inventory which will need to be sold down to bring levels more in line with actual revenue growth. And it's not clear whether that shortfall will be entirely recouped by Black and Silver model sales, which could negatively affect GoPro's ability to meet its aggressive goal for 56% year-over-year revenue growth when it reports third-quarter results later this month.
For many companies, it's an enviable problem to serve as your own greatest competitor. But it's clear the action camera maker's success is both a blessing and a curse. In the end, if the HERO4 Session's weakness causes GoPro's third-quarter results to lean more toward the latter -- and even with shares down more than 50% so far this year -- I'm afraid GoPro stock could have further to fall.