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What Will Change for GoPro When Karma Returns to the Market?

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Sales of Karma drone to resume in 2017

GoPro (GPRO) plans to relaunch its camera-based drone, Karma, later this year. Karma was pulled from the market in 2016 following a battery problem that caused it to lose power during flight.

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How will Karma’s relaunch impact GoPro?

Karma is crucial to GoPro’s revenue growth and diversification. GoPro relies heavily on the sales of its action cameras for the bulk of its revenue, but the company has continued to face stiff competition from fellow standalone camera brands and premium smartphones. Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), and Samsung (SSNLF) have continued to upgrade the camera features in their respective smartphones, eroding the market for GoPro’s action cameras.

The size of the consumer drone market is projected to be $4.2 billion by 2024, according to Grand View Research. The market was estimated to be $355.9 million in 2015.

If Karma sees success, it will not only diversify GoPro’s revenue beyond cameras but also boost the company’s camera sales, as the device comes with a camera attached. The basic Karma package costs $800, but its price could rise above $1,000 with add-ons.

Stiff competition leads GoPro to downbeat earnings

Competition from standalone camera makers such as Sony (SNE), Canon (CAJ), and Nikon combined with pressure from smartphones caused GoPro to report a revenue miss in 3Q16. Its sales in the quarter came in at $240.6 million, a fall of 40% compared to 3Q15. GoPro also saw an adjusted EPS (earnings per share) fall of $0.60 in the quarter, a sharp reversal from its adjusted EPS of $0.25 a year earlier.

Following the problems with Karma and its production delays, GoPro trimmed its 2016 sales target to a range of $1.25 billion–$1.3 billion. Its earlier forecast had called for revenue in the range of $1.4 billion–$1.5 billion.

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