GoPro Inc. (GPRO) has recently suffered from a slowing top line and three consecutive quarters of losses. There are several reasons for the poor performance, but a crowded market and a hesitant consumer have played major roles. To potentially make matters worse, Garmin Ltd. (GRMN) recently released its Virb Ultra 30, which is similar to the GoPro Hero 4 Black in appearance and price, but better on features.

According to TechCrunch and Tom’s Guide, the Virb Ultra 30 offers the following:

  • Records at 4k
  • Voice commands like “Okay Garmin” for start/stop recording and marking important events
  • Live streaming
  • Image stabilization
  • LCD color touch screen 
  • Waterproof housing
  • Performance data (speed, pace, altitude, G-forces, hang time, jump height, distance, grade, elevation, pitch, roll, course, GPS coordinates, and more)
  • Operates via a mobile app
  • Video editing tools
  • Shoots slow-motion video
  • Micro SD cord

The action camera market has become crowded, but mostly by cheap imitations. Garmin’s new action camera could present an immediate, real challenge to GoPro; there could also be a long-term threat to GoPro in the making. Garmin has generated $575.54 million in operating cash flow over the past 12 months, whereas GoPro has generated negative operating cash flow of $53.26 million over the same time frame. The lack of profitability will also put pressure on GoPro’s innovation and marketing potential.

Over the past year, GRMN has appreciated 31.14% while GPRO has plummeted 68.10%. Additionally, GRMN offers a 4.07% dividend yield whereas GPRO doesn’t pay a dividend. GoPro is hoping that its Hero 5 cameras and Karma drone will lift sales, but with Garmin eager to establish a presence in the market (with capital behind it), negative cash flow, a lack of profitability, smartphones as a cheaper alternative to action cameras, as well as Xiaomi in China, GoPro has many challenges to overcome. These challenges are likely why GRPO’s short interest stands at 30.84%.

Dan Moskowitz does not have any positions in GPRO or GRMN. 

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