GoPros may end up just being huge with tech nerds and not everyone else.
In a note on Wednesday, Citi’s Jeremy David and Ehud Gelblum lowered their forecasts for the company’s growth and earnings on concerns that the GoPro’s point-of-view cameras may not catch on with a big mainstream audience.
The firm slashed its forecasts for product growth to 13.5 million units by 2018 from 16 million units.
The stock fell by up to 5% in early trading to around $US55.67 per share. The analysts have a 12-month price target of $US56 with a “Neutral” rating.
Citi’s annual action camera survey of US consumers showed that fewer people are planning to buy GoPro cameras during the next 12 months than had been from last July until now.
“Only 5% of US consumers plan on purchasing an action camera in the next 12 months, down from 7% a year ago. Awareness of GoPro and its content is increasing (and now stands at 72%), but exposure to content is less likely to drive a purchase, and fewer respondents are describing the content as being “appealing.””
They also note that GoPros are still very popular among men, but interest with women is falling.
GoPro shares have been under pressure this year (down 11% year-to-date), and other analysts pointed to growing competition in the point-of-view camera space. In March, Chinese electronics company Xiaomi launched a GoPro rival that cost just $US64.
But Citi analysts don’t see competition as GoPro’s biggest risk. The big threat is from drones.
GoPro is in fact getting into the drone market. Shares jumped 7% late last month after CEO Nick Woodman said the company is developing a six-camera virtual-reality recording system and a drone.
Citi wrote that these announcements were “defensive moves” because the same enthusiasts that drove the growth of GoPro cameras are now really into drones.
“We now believe there is a material overlap between the action cam market and the drone market; the faster the growth of the drone category, the higher the risk of a slowdown in the action camera category. Hence, the threat landscape for GoPro is not about competition from other action camera OEMs; it is about disruption from drones and, to a lesser extent, virtual reality. We do not believe GoPro is a good play on drones at this point as the company does not plan to have a product out until 2016, has a lot of “catch-up” to do, and potentially is a net loser if drones eat into sales of action cameras where GoPro has ~70% share.”
This chart, from Citi’s survey, shows that people aren’t as interested in GoPro cameras as they were a year ago.
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