If the stock market is anything to go by, one of two things could be happening with Action cam manufacturer GoPro. Nobody would blame you if you argued that the company is going to keep growing... But there's a group of people who are expecting the company could implode any moment.
Normally, if you buy stocks, you are hoping for their value to go up. In other words, if you bought Tesla shares two years ago, you'd have to pay $40 per share. Today, you'd be able to sell them for $188, making a rather tidy profit in the process.
There is another way to make money on the stock market–by 'shorting' stocks. The way this works–as very eloquently explained on NPR's Planet Money podcast–is this: You 'borrow' stocks from a broker, and sell them back to them later, at an agreed price. If the price has gone down, you make money. 'Shorting', then, is to bet that a company is going to do badly in the future.
In January, according to a few different sources, GoPro was the most shorted stock on the stock market. That means that a lot of people believe GoPro is going to go down in value.
Well, if you do a bit of research into GoPro, two different stories emerge: In the pessimistic story (i.e. the story that causes people to 'short' these stocks), investors believe that there are now so many different people creating and selling action cameras, that it's become a race to the bottom: All features stay essentially the same, but the price is plummeting.
The optimistic story is the exact opposite: Yes, perhaps prices are going down, but GoPro is a hugely recognisable brand. In fact, a lot of people don't even know to ask for an 'action camera'–they immediately Google GoPro, and find the camera they want. (See what I did there? I didn't say 'search on the Internet'. I said 'Google'. That's an illustration of the exact same thing.) Apple are a good example of this, too: as computers became commodities (in a process known–unsurprisingly–as commoditisation), PCs became cheaper and cheaper–but Apple added a certain je ne sais quoi that kept their prices–and their profits–high. The result is that Apple became one of the most valuable companies in the world.
Which story is correct?
I haven't a crystal ball, so honestly, I haven't the faintest, foggiest idea. But it's easy to imagine some truth in both stories.
Personally, I've never really been in love with the GoPro cameras. Sure, they are clever pieces of kit, but the design is... Well... It's a square box. Also, the video quality is pretty good, but you can get better, easier to use kit.
In my mind, GoPro is a marketing company first, and a product company second. There's nothing wrong with that; there's a lot of very profitable companies operating that way. Take Coca-Cola, for example: Their main product is pretty much the same as other fizzy drinks, but you pay more for Coca-Cola than for your local supermarket own brand. Is that because Coke is more expensive to make? Possibly–but you're also much more likely to see adverts for Coca-Cola than for your local supermarket fizzy cola. Advertising doesn't come free–and that's why you pay more for Coca-Cola. GoPro is similar: They've spent a tremendous amount of money on becoming the sexy active camera kit, and getting their brand out there. Laudable, of course, and they've done very well indeed–but what's preventing another player from coming in and doing better, at a lower price point?
One of the big recent growth markets for GoPro has been the drone market–but also here there is a huge amount of competition. DJI, for example, do sell a drone with a GoPro mount–but they also have a series of drones that have their own cameras built in–cameras that have specific advantages over their GoPro counterparts.
The flip-side is also true, though: As I mentioned above, people know to ask for GoPro by name, which is half the battle. Or, to put a sharp point on it: There are many cheaper colas than Coca-Cola, but Coke is still around.
Whether GoPro will continue rocketing from strength to strength, or whether it will eventually implode under its own marketing weight, who knows... But I, for one, love the fact that somewhere, deep in the bowels of the financial world, analysts are fighting this battle while keeping a very close eye on GoPro.
So... What do you reckon?
We'd love to know what you think the future of GoPro is going to be. Vote in the poll below (and you'll be able to see the results once you've done that!)