What: Shares of GoPro (NASDAQ:GPRO) were up 12.7% as of 12:30 p.m. Thursday after an analyst suggested the action camera specialist could be an acquisition target for Apple (NASDAQ:AAPL). GoPro also launched a new promo for its new quadcopter, named "Karma," and announced Apple Watch integration for the GoPro App.
So what: Apart from the drone's curious name (karma can be good or bad, after all) GoPro's new video doesn't technically reveal anything new, but rather features a voiceover added to previously released teaser footage shot from a prototype Karma unit. But considering GoPro still expects Karma to officially lift off in the first half of 2016, now's as good a time as any to ramp up its hype machine for the new product.
The more likely driver of today's optimism, however, was a positive note on Apple from FBR analyst Daniel Ives. Specifically, Ives reiteraed his "outperform" rating on Apple stock and offered a $175 price target, then followed to suggest the folks in Cupertino have come to a "critical juncture" where they should consider making a large acquisition such as GoPro.
According to Barrons, Ives elaborated, "We believe an acquisition of GoPro would make sense for Apple; action cameras are uniquely positioned at the intersection of Apple's smartphone, wearables, and multimedia offerings. Additionally, GoPro's new product cycles could open the door to areas where Apple's competitors are investing heavily (e.g., drones, VR), and Cupertino has been playing catch-up."
As it turns out, GoPro also issued a timely press release early this morning highlighting the announcement of new Apple Watch features for the GoPro App. Specifically, the new app provides users with fast access to the camera's controls from the Apple Watch, including the ability to preview shots, toggle capture modes, start and stop recording, and add HiLight tags to videos.
Now what: More than anything, at this point an acquisition is speculative in nature and should not be central to any investing thesis. And even with GoPro shares down nearly 70% so far in 2015, I'm still convinced GoPro investors would be wise to focus first on the fundamentals of their business.
For now, those fundamentals aren't pretty after GoPro revealed significantly weaker-than-expected guidance for the holiday quarter, then compounded my worries by dropping the price of its HERO4 Session for the second time since it launched five months ago. That's not to say those concerns aren't already priced in to GoPro stock, which now trades at a reasonable 16 times trailing-12-month earnings. But I personally won't be surprised if it has further to fall until its new products begin to hit retailers' shelves next year.