Kudos to GoPro (GPRO) execs for finally generating some badly needed product buzz.
Unfortunately for the camera maker, the buzz around a new drone will only mask lingering problems about the company for a short while. Make no mistake, though, the Karma drone is a pretty cool gadget that will probably be on the holiday wish list of rich kids.
Going on sale on Oct. 23, the drone will cost a hefty $799, or $1,099 with a new Hero 5 camera ($999 with a Hero 5 Session). GoPro made the drone foldable for easy storage for those adventure seekers who are often quickly on the go out in the wild. On one side of the device's controller, there is a touch-screen display and, on the other, two joystick buttons. Overall, a minimalist design that shouldn't make it too intimidating for people shopping for a drone that doesn't require hours of training to fly.
Investors initially embraced the product news from a company that has battled nothing but bad news for over a year. Shares spiked as much as much 9.9% on Monday but ended up giving back most of those gains. That pullback is quite telling as to how Wall Street truly feels about GoPro's product lineup and longer-term outlook. A couple of issues at hand...
It's a drone, yawn: GoPro rose to fame -- and eventually became a public company -- because its camera was something nobody else had done before. Couple that with a treasure trove of digital content emanating from people using their cameras, and GoPro was seen as the next Disney (DIS) . Another drone sitting (and two-camera as well) on the shelves of a crowded drone market isn't the type of game-changer that suggests GoPro is back to being a big-time innovator. Looked at another way, if a drone that carries cameras is the only thing GoPro has cooking into its R&D facilities, then all of its investors should be concerned. A tech innovator creates new platforms, the best-use cases being Apple's (AAPL) iPhone or Netflix (NFLX) . (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
It's a non-commercial drone, sadly: The real long-term money in the drone market is in commercial applications such as delivering a pizza from the sky or other small packages ordered from Amazon (AMZN) . A couple of months ago, Walmart (WMT) even showed off to this writer a drone being used to check inventory in a giant distribution center. Sure, the government isn't making it easy for commercial drone use to take off (pardon the pun), but over the next 10 years those that can build amazing commercial drones should be huge winners. (Amazon is part of TheStreet's Growth Seeker portfolio.)
The global market for commercial applications of drone technology, currently estimated at roughly $2 billion, will balloon to as much as $127 billion by 2020, according to PricewaterhouseCoopers LLP. GoPro's Karma is not made for commercial uses, and there are no indications the company has one in the works. That's a disappointment, especially as companies such as UPS (UPS) , Walmart and Amazon are probably on the prowl for acquisitions in the drone space.
Credit to GoPro for winning with media outlets for a day. Nothing gets the juices going in news like putting a photo of a scary-looking drone on a homepage. But GoPro has likely fallen short again of winning with investors, raising questions about its profit and cash flow outlook for 2017. Yes, cash could become a problem for GoPro soon after a dismal 2016. Just something to watch out for amid the buzz.