DJI is hunting GoPro to extinction

GoPro just can’t catch a break.

The action-camera company first floated on the stockmarket in June 2014 at $24 a share.

By the end of that year it was trading at $94, giving early investors a 291% profit.

But that’s when the fun stopped. GoPro’s stock continues to slide throughout 2015 and by November it was below IPO price.

Today, it’s worth $5.11 a share. That’s a 94% drop from its all-time high.

Back in 2014 GoPro was just about the only game in town when it came to high-quality action cameras. And it had massive recognition.

GoPros were everywhere, and not just strapped to extreme sports stars, they were used in Formula 1, travel and nature shows, documentaries… you name it.

Peter Jackson even used a GoPro for one of the scenes in The Hobbit – much to the derision of video professionals worldwide.

However, as with most technologies, pretty soon copycats started popping up. Those copycats were pretty good, and made a mockery of GoPro’s pricing strategy.

It was also around this time that cameras on smartphones became much more capable.

So, GoPro had competition from copycats and smartphones alike.

Its big idea was to expand its range and up prices. But that dramatically backfired.

From The Guardian in 2016:

This week, the group’s shares lurched dramatically downwards. On Wednesday, they plunged 28% to just more than $12 as the group said sales were not meeting targets and it would miss revenue projections by around 14%for the calendar year. The problems are centred on GoPro’s Hero4 Session – a new camera released last year small enough to fit in the palm of a hand. But buyers balked at the $399 launch price. GoPro cut the price to $299, and then again to $199 (about £170 in the UK) in a bid to boost sales.

But GoPro had a couple of tricks left up its sleeve. The GoPro Karma drone and Karma Grip.

These were launched in late 2016, with the hopes of bringing the company back to its former glory.

Be warned, once you read this section you will never view any film or TV show in the same way again

The Karma drone was, as you may expect, a drone that you strapped your GoPro into to take amazing aerial footage. And to be fair, when you first see drone footage, it is pretty amazing.

The Karma grip was the part of the drone that kept the video footage stable. You could take it off the drone and put it in a grip so you would have stable handheld footage.

The Karma grip was basically just GoPro’s name for a three-axis gimbal.

If you don’t know what a gimbal is, don’t worry, you’re far from alone. But after reading this today, you’re going to see them everywhere.

Here’s a photo of one of my gimbals I took at the top of a mountain in Italy this summer.

Source: me

You hold the long bit, kind of like a torch and it makes all your video footage super stable.

Almost every single TV show and film now uses gimbals to keep its cameras steady. It usually makes it look like the camera is flying through space. They are particularly popular with interior design and travel shows.

The footage from a gimbal-mounted camera looks almost identical to drone footage, except it isn’t hundreds of metres in the air. It’s a normal height off the ground.

Here’s a promo video by DJI for its Ronin-S gimbal. You can see the effect it creates throughout the video. As I said, be warned though. Once you see it, you can’t unsee it.

As Gimbals and drones are such a big market now, with amateur vloggers and professional producers alike, GoPro was hoping its Karma line-up would get its business going again.

Only it didn’t count on a Chinese company called DJI.

DJI is hunting GoPro to extinction

DJI makes a whole host of drones and gimbals. At the time when GoPro came out with its Karma drone, DJI only had professional, expensive drones.

Then DJI released a number of cheap, easy-to-use drones with impressive picture quality.

These were higher quality, cheaper and easier to use than GoPro’s Karma drone. And after a couple of years GoPro decided to cull its Karma drones. It announced it would be ceasing production this January.

Instead, GoPro went back to its roots and redesigned the GoPro action camera. Well, the internals of the camera at least.

In September GoPro released the “gimbal killer” GoPro Hero 7 Black.

This camera has “gimbal like” stabilisation built into its electronics. It really is very impressive. I’ve used one myself, and I’ve used a number of gimbals, and what the new GoPro can do is revolutionary.

They had a big campaign and got many of YouTube’s top names to review the GoPro. Most of these vloggers were highly sceptical, but ended up buying one themselves in the end. The new GoPro is just that good.

Here’s GoPro’s promo video for the Hero 7.

Things were finally looking up for GoPro. People liked it again. True, it had to cannibalise its own Karma grip gimbal to do it. But, that as a small price to pay.

GoPro’s stock was finally on the up. And in the days following the Hero 7 release it rose 18%.

Then, out of the blue, in late November, DJI announced a tiny camera with a built-in gimbal called the Osmo Pocket.

GoPro only had it good for two short months.

To make the Osmo Pocket, DJI basically took the gimbal and camera mechanism from one of its drones and made it into a standalone camera.

Here it is next to a normal-sized gimbal:

The Osmo Pocket is £55 cheaper than a GoPro Hero 7 and produces sharper footage.

GoPro killed the gimbal so DJI simply reinvented the gimbal in a new, pocket-friendly form.

Of course, a GoPro is still better to use for anything involving water, as it is waterproof without the need for accessories. But for vlogging, or any other kind of filmmaking, the Osmo Pocket does a better job, and for less money.

GoPro just can’t catch a break.

Since the day the DJI Osmo Pocket was announced, GoPro stock has dropped over 10%.

Last year DJI made $2.9 billion in revenue, more than doubling to GoPro’s $1.18 billion revenue.

DJI is reported to be IPOing next year. From Reuters in March:

HONG KONG (Reuters) – China’s SZ DJI Technology Co Ltd, the world’s largest maker of non-military drones, is in talks with investors for at least $500 million in funding ahead of a planned stock market debut, people with knowledge of the matter said.

With the funding, set to be obtained via a combination of new equity and debt, the firm would be valued at about $15 billion, nearly double its valuation in 2015, they said.

Proceeds from the fundraising could be between $500 million and $800 million, one person said.

DJI, which commands 70 percent of the global commercial and consumer drone market, wants to finalize the deal in the coming months while a stock market listing either in Hong Kong or mainland China would likely take place next year, they added.

As I said earlier, when GoPro had its IPO, investors flocked to it… and dumped it just as fast.

DJI floating on the stockmarket is likely to create just as big of a buzz, for those who follow these types of stocks. The question is, will it go the same route as GoPro and quickly fall from grace, or will it make a good long-term investment?

I guess a lot of that will depend on how the US China trade war turns out.

And with China threatening “grave consequences” over the Canadian kidnapping of Huawei’s CFO (who happens to be the company founder’s daughter) for the US, it doesn’t look like there will be a resolution any time soon.

Still, DJI and GoPro cameras are a lot of fun.

Until next time,

Harry Hamburg
Editor, Exponential Investor

Category: Robotics

From time to time we may tell you about regulated products issued by Southbank Investment Research Limited. With these products your capital is at risk. You can lose some or all of your investment, so never risk more than you can afford to lose. Seek independent advice if you are unsure of the suitability of any investment. Southbank Investment Research Limited is authorised and regulated by the Financial Conduct Authority. FCA No 706697.

© 2019 Southbank Investment Research Ltd. Registered in England and Wales No 9539630. VAT No GB629 7287 94.
Registered Office: 2nd Floor, Crowne House, 56-58 Southwark Street, London, SE1 1UN.

Terms and conditions | Privacy Policy | Cookie Policy | FAQ | Contact Us | Top ↑