It was a big weekend for GoPro (NASDAQ:GPRO). The Karma drone -- GoPro's first foray into the realm of unmanned camera-wielding aircraft -- hit retailers on Sunday, and the leading wearable camera maker's stock has positive momentum through the past few trading sessions. GoPro stock rose 9.8% last week, fueled by takeover speculation, a third party's encouraging report on initial Hero5 sales, and buzz surrounding Karma's release.
The report on strong Hero5 sales is the most important of the three catalysts, as it's the one tangible and lasting factor. Hype surrounding a new product and rumor mill chatter fade. Strong sales are everything these days for GoPro.
Cleveland Research -- an Ohio-based independent investment research firm -- issued a new report, indicating that the Hero5 camera that hit the market earlier this month is selling well out of the gate. The report estimates that the new wearable camera is selling better than expected, with partner fulfillment levels appearing to account for at least half of the orders. Supply chain discussions have been encouraging.
There's a lot riding on Hero5's success this holiday shopping season. It's been two years since GoPro's Hero4 rolled out, and it's in a funk these days. It has experienced year-over-year sales declines of at least 30% in the past three quarters, and analysts see another double-digit slide on the top line when it reports its third quarter results on Nov. 3. Things should get a lot better at this point. Wall Street sees a big spike in sales and earnings during the current quarter, but for that to happen Hero5 has to be a hit. The Cleveland Research report suggests that the bullish scenario could be in the early stages of playing out.
Buyouts and buy ins
"GoPro active amid renewed takeover speculation," TheFly.com reported on Thursday morning.
There isn't a lot out there in terms of potential buyers or if GoPro would actually entertain any unsolicited offers, but it's easy to see why there could be some interest in acquiring the out-of-favor consumer tech specialist. The time to snap up an established brand is when it's in a rut, and it's better to make a move now than wait until it finds a holiday hit in either Hero5 or Karma.
By the same token, buyout chatter is typically speculative fluff. It's good for a rally here and there, but it's not sustainable unless a deal actually materializes. The same can be said about buzz surrounding a new product. Actual sales will have to happen for a product to live up to the hype.
Shareholders will naturally appreciate last week's pop. The stock had taken a 17% hit a week earlier after it was revealed that GoPro's Hero5 was not available directly through Amazon.com (NASDAQ:AMZN). Hero5 and Karma are available only through third-party sellers, and that typically results in weak availability and erratic pricing.
GoPro expects to start selling directly to Amazon again by the end of this month or early next month, but as of Sunday night that is still not the case. Amazon is obviously an important sales outlet, but it's not something to fret about unless this is still the case as we get closer to the critical holiday shopping season. What matters now is that GoPro's Hero5 is apparently selling briskly, and now it's time to see if Karma -- the drone and its sales -- can take off, too.