A Skeptic's Take On Tech Darling GoPro

By Barry Randall

GoPro is definitely ready for its close-up.

The action video camera vendor (GPRO) keeps moving from strength to strength.

In April, it released its fourth earnings announcement as a public company. And since its IPO on June 26 of last year, it has handily beaten Street earnings expectations four straight times.

Not only that – in that March quarter earnings release, it also issued above-consensus guidance for the current June quarter - traditionally a seasonally softer period.

 

GoPro

 

Overseas Expansion

This unexpected strength is due in part to GoPro's ever-expanding product line. They now have five different models of their flagship Hero video camera.

GoPro is also moving decisively overseas and now gets more than 50% of its revenue from international markets.

Moreover, its market power is such that it can sell and be paid in US dollars, avoiding the foreign exchange headwinds currently affecting so many American multi-nationals.

 

Riding the Tiger

So it's fair to say that GoPro doesn't really have any major problems to speak of. Unless you want to count 'riding the tiger' as an industrial problem.

But managing breakneck growth goes beyond just adding second and third shifts 'down at the plant.' Having not one but two Asian contract manufacturers, Chicony Electronics and Sky Light, certainly helps with THAT particular issue.

No, "growth" in this context means a hardware-based company preparing for the inevitable, when Moore’s Law catches up with you and you can no longer increase sales volumes enough to overcome lower average selling prices.

 

Beyond Cool

In other words, when your cool tech product is good enough, and even though a replacement is cheap, there isn't enough "up" in an upgrade.

You know, just like the PC business about 10 years ago, when PC prices crashed to the sub-$500 range and unit growth rates sank to GDP territory.

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