What's Up With GoPro and Amazon?
GoPro (NASDAQ:GPRO) was on the upswing not all that long ago, particularly after the company introduced new cameras and a drone product in mid-September. However, shares have struggled mightily this month, down almost 20% in October.
Not helping matters is the decline on Thursday when it was reported that "the company has stopped shipping to Amazon." Obviously, Amazon (NASDAQ:AMZN) is a large seller of products for a number of companies, and that's no different with GoPro, as the e-commerce platform represents 12-14% of its revenue.
Management apparently hopes to resume working with Amazon within a few weeks. Estimates say losing a month of sales via Amazon in October will result in a $10 million loss of revenue. I found this in a note from Charles Anderson of Dougherty & Company:
"GoPro tells us that they are doing this because of their displeasure over how its products were priced on Amazon recently (like many consumer electronics brands, GoPro gives its retailers certain guidelines on how products can be priced). Because retailers like Best Buy (GoPro's No. 1 customer most quarters) now price match Amazon.com, the integrity of retail pricing is extremely important."
Others have made the case that demand is exceeding supply for the Hero 5 camera.
What I'm seeing is an event that, on the surface, looks and sounds quite bad. But underneath, it isn't quite what it's being made out to be. If Amazon cuts the price on the Hero 5 and Best Buy (NYSE:BBY) follows suit, this won't be good for GoPro. However, if customers are hell-bent on getting a GoPro, whether they buy it in October, November or December, they are going to buy it. Preserving margins is a key thing for the company to do, particularly after last year's disappointing results.
Also, if consumers are looking to get the device online and cannot get it from Amazon, do you know where they'll likely turn? That's right, GoPro.com.
Can Sony Kickstart the Virtual Reality Market?
Let's take a broader look at the VR market for a second. If you haven't tried it, it's easy to dismiss it as the next fad, but I really don't see it that way. I didn't feel it was a fad before I tried it, and I definitely don't view it as fad after.
The experience is quite immersive, but some people like to harp on the negatives. The quality of the entertainment, the price, the lack of content, etc. If the chicken and the egg debated who should go first, we would have ended up with neither. What I mean by this is simple: the developers couldn't, and wouldn't, come out with content without the headsets, even though that forced headset makers to roll out expensive hardware with little content on the shelves.
Given that these headsets are new to the market, of course they are expensive. Were computers cheap when they first came out? No, but look at how far they have advanced over the years. VR is the same way. It's an incredible concept that, at the moment, is weighed down by a high price and limited content.
VR is not just for gaming, though. We've already seen its effectiveness in sports training, and it can be used for entertainment (like movies, city/world tours, etc.) and education. I've also seen it used in the real estate world. Imagine touring a house on Zillow (NASDAQ:Z) from the comfort of your own home. VR can do that and much more.
So right now, the market has limitations. Facebook (NASDAQ:FB) CEO Mark Zuckerberg spoke about VR recently, explaining that its Oculus property is attempting to make a mid-level VR set. One that doesn't sacrifice much on the specs, but is also more affordable than current models.
Most high-quality VR sets cost anywhere from $500 to $800, and that doesn't include the price of the high-powered computer needed for the product.
However, Sony's product comes in at "just" $400 and can be powered by a PlayStation 4. If you don't have a PlayStation, this will set you back an extra $400 or so, so the total cost could be around $800, plus some other necessary hardware. Not necessarily cheap, but still cheaper than many alternatives.
Could it be a game changer, though? Ten years from now, it may not seem like it. And I'm not necessarily a visionary here. But I will say this much: Sony already showed it can be monstrously successful with its console, selling more than 40 million PS4s so far, roughly doubling Microsoft's (NASDAQ:MSFT) Xbox sales.
All of those customers are instantly a Christmas present away from donning a VR set on their head. PlayStation also has the platform that can support a strong lineup of content and already has some ready to go upon launch. So while it's not necessarily make-or-break in the VR world this early in the game, I think Sony does have what it takes to help push VR in the right direction. With a lower pricing point and strong content, it can accelerate VR past early adopters and into the mainstream.
Do I think VR will have a "GoPro holiday season" like the action camera maker had a few years ago? No. At least not this year. I think the technology we've seen this year is impressive and is a great starting point to build off of. But another year or two of improving content and lower prices will be what really lets this industry take off.
What's Happening to Our Tech IPOs?
Talend (NASDAQ:TLND), Acacia (NASDAQ:ACIA) and Twilio (NYSE:TWLO) were the IPO darlings of 2016. But recently, they've been suffering. Despite Talend's 10% climb on Thursday, shares are still 30% from its highs, with Acacia and Twilio (the super darlings) off a similar amount.
Is this a buying opportunity or a red flag? Most of this comes down to valuation, honestly, so the answer will depend on the investor.
For me personally, I tend to miss the boat on these IPO plays, then never feel comfortable enough to buy them after they've rallied 100%, 200% or sometimes 300%. I know their businesses are great, but I just can't pull the trigger on a stock that has rallied so far. Maybe it's from watching GoPro, Shake Shack (NYSE:SHAK) or any number of other hot IPOs eventually cool.
For instance, is Twilio really worth $4 billion (even after its pullback from nearly $6 billion) despite expectations for it to have sales of just ~$270 million this year? In other words, would you invest in a local lemonade stand with a $100,000 valuation that has sales of just $6,500? Even though that lemonade stand has great growth prospects, there's a level where it becomes unreasonable. Unless it's like the stand below:
Call me old-fashioned. Or something. But even with Twilio/Talend/Acacia down 30%, and even with such good preliminary results from some of them, I just can't fork out the dough for the valuation these stocks currently demand.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.