GoPro may be in trouble, and Apple isn't coming to the rescue

December 14, 2015, 8:54am


GoPro CEO Nick Woodman can’t count on Apple to bail him out. (Photo by Andrew Burton/Getty Images)

By Brian Solomon, Forbes

It’s not every day that Wall Street analysts admit “We were wrong” about a company like GoPro.

Yet that’s how Citi analyst Jeremy David begins his new note on the action camera maker–as he slashes his GoPro price target from $75 down to $22. The timing of the note is odd, and not only because GoPro hasn’t traded close to $75 in more than a year and is down 80% from its peak in October 2014.

It’s also strange because GoPro stock just rebounded more than 11% on Thursday on two pieces of news. First, the company released a teaser video for its long awaited quadcopter drone product. Second, FBR’s Dan Ives picked GoPro as a potential acquisition for Apple AAPL -2.65% in 2016.

The newly solemn analysis from Citi pours a lot of water on that fire. On the acquisition front, David calls it “unlikely” because GoPro owns only 56 patents (as of February 2015), not enough to warrant a purchase for technology reasons. In other words, a company like Apple has plenty of technology expertise to build its own action camera without needing to buy GoPro to do it. (Putting aside the fact that Apple has no reason to go into the relatively niche market anyway when its iPhone is already the world’s leading camera.)

Furthermore, founder and CEO Nick Woodman would have to be a willing seller, “and we think it is unlikely that he would be open to a sale considering where the stock is trading, and based on the longterm aspirations of the management team,” writes David. “While we expect rumors of a sale of the company to make headlines from time to time, we believe they lead to nothing more than increased stock price volatility.”

As recently as September, Woodman denied he or Apple had any interest in a partnership or merger.

Meanwhile, Citi worries that the drone product won’t be able to stem the “softening” demand for GoPro products–including the new HERO4 Session. “While we initially thought GoPro would recover from the poor HERO4 Session sell thru (initially attributed to poor marketing/ launch timing), we are becoming worried that the poor sell thru could be a reflection of diminishing consumer interest in new GoPro devices/ features that GoPro is introducing,” David writes. “We note that the Session is a perfectly good product, and is the favorite GoPro device of the CEO and the CFO, so its lack of momentum in the marketplace at a $300 price point is a bit of a head scratcher.”

GoPro shares traded down 3% in Friday morning trading to just over $18 per share.