GoPro's (NASDAQ:GPRO) HERO4 Session is cheaper than ever, but that might not be a good thing for GoPro investors.
Specifically on Friday, GoPro just dropped the price of its HERO4 Session camera by $100 to $199. In a press release, GoPro lauded the move as a "game changer" that makes "it easier than ever to self-capture and share 'wow' footage of your favorite activities."
That seems fair enough. After all, the HERO4 Session is GoPro's smallest and -- with its one-button control, built-in Wi-Fi, and waterproof casing -- arguably its most convenient device yet. And at $199, the HERO4 Session is attractively priced on par with the Wi-Fi-enabled version of GoPro's entry-level HERO+ Camera.
So, what's not to like? For one, this could set up the HERO4 Session to cannibalize sales of GoPro's entry-level product line -- that is, unless GoPro's lower-end cameras were already suffering from weak sales so far in the crucial holiday season. To be fair, though, I would be much more concerned with weak consumer demand for GoPro's higher-priced (and higher-margin) HERO4 Black and Silver cameras.
For perspective, remember GoPro initially launched the HERO4 Session at $399 almost exactly five months ago. But after the promising new camera experienced exceedingly weak sell-through in its first two months -- and following "strong feedback" from consumers -- GoPro reduced the HERO4 Session to a "more accessible price" of $299.
GoPro CEO Nick Woodman explained at the time, "We believe we priced the product too high at $399, which caused consumer confusion where they were asked to decide between the HERO4 Silver, also priced at $399."
As a consequence, investors should also keep in mind dropping the price meant GoPro incurred $19 million in market development funds and price protection in the third quarter -- think, for example, when customers are granted a partial refund after purchasing at a higher price -- so it stands to reason similar charges could be taken in the current quarter.
A failed rebound?
Finally, when those charges combined with weaker-than-expected broad demand for GoPro products due to its unfortunate underfunding of marketing in both the second and third quarters, GoPro's third-quarter results ended up falling significantly short of both its own guidance and analysts' consensus expectations.
To prevent that from happening again, recall GoPro revealed plans to aggressively advertise beginning in the fourth quarter, including a return to television after a one-year hiatus from the small screen. In addition, GoPro promised it would move to expand digital in-store and out-of-home initiatives globally. In theory, this should have not only improved broad demand for GoPro products but also helped the company move through the higher-than-anticipated HERO4 Session Inventory with which it was left headed into the holidays.
At the very least, the latest price drop seems to indicate consumers still weren't interested in GoPro's smallest device at $299. With less a month remaining in the fourth quarter, I'm afraid the now-even-cheaper HERO4 Session means more bad news is on the way for GoPro investors.