The world's largest online retailer isn't selling GoPro's (NASDAQ:GPRO) new camera, at least not directly, and that was enough to send shares of GoPro sharply lower. GoPro stock took a 16.8% hit on the week after Piper Jaffray analyst Erinn Murphy made the problematic observation.
Murphy uncovered that GoPro isn't selling its new Hero5 camera directly through Amazon.com (NASDAQ:AMZN), and that's a problem, given the way the online retailer is often the first and sometimes only source for many shoppers. You can buy a Hero5 through Amazon.com, but it's through third-party sellers and often leads to wild pricing volatility and weak control of quality and fulfillment.
There were just 13 GoPro Hero5 Black cameras available as of last night, listed as used or refurbished. They start at $469.99, which is problematic when you consider that they're readily available through GoPro.com or bricks-and-mortar consumer-electronics chains for the normal retail price of $399.99. Individual sellers often jack up prices on products that are hard to find elsewhere, but that's just not the case here. Opportunistic resellers are merely taking advantage of what should be a temporary lull where GoPro isn't selling directly through Amazon.com.
Smile for the camera
There are a couple of problems with the situation, and we're not just talking about the lack of likely sales given the unjustified markups on products that are labeled as used or refurbished. Folks searching for Hero5 -- or the also misrepresented Hero5 Session -- will probably balk at the price gouging. They'll buy other wearable cameras.
There's also the nature of Amazon reviewers. The camera is receiving an uninspiring 3.7-out-of-five-star rating, but some of the negative reviews have little to do with the actual product. Potential buyers are miffed at the out-of-touch pricing through Amazon's third-party resellers.
The good news is that GoPro and Amazon should settle their differences soon. GoPro expects to be selling directly through the leading e-tailer as soon as later this month, but no later than early next month. The sooner, the better, of course, since GoPro's buzz-generating Karma drone goes on sale a week from today.
Piper Jaffray's Murphy was already bearish on the stock, and her $9 price target implies 34% more in downside even after last week's slide. However, at least one Wall Street pro sees last week's drop as a buying opportunity. J.P. Morgan analyst Paul Coster defended GoPro's stock, pointing out that the lull applies just to domestic sales through the site as international sales continue on Amazon.com's overseas shopping destinations. Amazon may be an important channel partner for GoPro, but the brief hiatus shouldn't cost GoPro more than 30,000 Hero5 units or roughly $10 million in sales.
The real test will come this holiday shopping season. GoPro is off to a bad start by not being at its best through the leading online retailer, but the real demand for Hero5, Hero5 Session, and Karma products will come later in this seasonally potent holiday quarter.