GoPro clears up the pricing and shipping issues with the HERO5 and KARMA in a timely manner, the company still has a decent chance of hitting its holiday sales target.
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Manufacturing a smaller first batch of drones for the holidays is also wiser than producing too many devices and causing inventories to soar. KARMA may be facing production or supply issues – there are reports of the initial shipment dates for the drone bundles being pushed back to mid-November.
GoPro already used big discounts to reduce bloated inventories of last year’s HERO4 Session, and it’s probably wary of making the same mistake. Amazon’s prices also impact major retailers like Best Buy, Target, and Wal-Mart, which all agree to match Amazon’s non-Prime prices. If Amazon sells the HERO5 Black for less than $400 or the Hero5 Session for less than $300, it would pressure other retailers to lower their prices. If that happens, GoPro’s gross margins, which have already been very wobbly over the past year, could fall head over feet.
Amazon sales account for some 12%-13% of GoPro’s total sales.
GoPro stock recovered nicely on October 17, gaining 3.5%. In other words, it made back what it lost the previous session, when it pulled the HERO5 from Amazon to renegotiate pricing.
GoPro also isn’t the only drone maker facing shipping delays. DJI’s Mavic Pro, widely expected to be the KARMA’s fiercest rival this holiday season, has also seen its initial shipments delayed from mid-October to mid-November. According to DJI, the delay in shipping their drone is due to amazingly strong global demand, while GoPro has not made any comments pertaining to inventory supply.
GoPro made a lot more cameras than the market wanted. That resulted in a $21-million impact to revenue from price reductions, and $40 million from price protection charges for the HERO4 Session camera in Q4 2015.
GoPro expects that robust growth, fueled by strong HERO5 and KARMA sales, to lift its bottom line back into the black after four straight quarterly losses. $677 million in sales would be a record quarter for GoPro. The company’s strongest quarter to date was the fourth quarter of 2014, when it reported sales of $634 million on strong demand for its HERO4 devices.
On the HERO5 camera side, it has a decent idea how many cameras customers will demand by the end of the year. It has a history with the product, and has shipped 3.5 million cameras in the second half of 2014 and 3.6 million in the second half of 2015. It’s safe to say that a number somewhere in that range will be shipped this year.
Furthermore, GoPro is seemingly creating a fierce demand for the new products launched in Q4 and reducing the inventory in 2016 rather than too much. GoPro will host a conference call and live webcast for analysts and investors on November 3, 2016 at 2 p.m. Pacific Time (5 p.m. Eastern Time) to discuss the Company’s financial results.
