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GoPro's Problem: Mainstream > Extreme

Posted by Robinhood Snacks on Wednesday, October 9, 2019 Under: 848FINACE


GoPro unveils 2 new cameras to end its 3-year profit draught

If you land a fakie-to-fakie 720 and no one sees it... did it even happen? That's why GoPro exists. The action camera icon just unveiled 2 new models: $399 for the uncreatively named HERO8 Black and $499 for the HERO Max. Just in time for the holidays, the only gift GoPro shareholders want is a charming return to profitability.

  • Sales are down 35% from 4 years ago.
  • The stock's down 83% over that same period.

GoPro’s problem: Mainstream > Extreme... The new iPhone boasts 3 cameras. Three. Apple's photographic game is more than enough for most mainstream buyers. That's pushed GoPro to focus on extreme customers who appreciate the 12 megapixels and hypersmooth stabilization of its new lenses. Too bad "extreme" is a much smaller market than "mainstream."

THE TAKEAWAY 

GoPro's got no moat... A "moat" is how a business guards itself long-term from competition (picture Tylenol's patents that protected its recipe for years). GoPro boasts some unique technology in its surf-proof, snowboard-capable cameras, but rivals like Garmin and Samsung have effectively (and legally) replicated them. For cheaper.

Discount

Charles Schwab slashes stock trading fees to $0. Then its shares fell 10%

Big summer blowout... Stock trading is 100% off. Online broker Charles Schwab will stop charging $4.95 on stock, options, and ETF trades starting Oct 7th. But the commission-free announcement dropped Chuck's shares 10% — and rival E-Trade fell 14% and TD Ameritrade plummeted 26%. Here's the percentage of all their revenues that come from trade commissions:

  • E-Trade = 25%
  • TD Ameritrade = 16%
  • Charles Schwab = 7% — Chuck's more diversified in how it makes money, so killing a revenue source won't sting as badly.

Back in the day... buying a stock meant yelling into phones and paying a fee that might cost you more than the stock itself. Chuck is betting that sacrificing short-term revenue (the $4.95 it makes today for each trade) will win customer love and make more money long-term. But here's our Snackable history of stock trading fees:

  • $49/trade: That was the average trading commission in 1975, when Chuck launched its discount brokerage.
  • $10/trade: The average commission dropped by 2015, triggered by Robinhood's commission-free trading app, which launched in 2013 (full disclosure: Robinhood Snacks... is owned by Robinhood).
THE TAKEAWAY 

This is now a price war... and price wars destroy profits. Once a large company starts slashing prices, it can become a price competition among rivals that ends at rock-bottom prices (customers love it. Competition is good.). E-Trade and TD Ameritrade shares fell Tuesday because now they're pressured to join the commission-free battle, too — everyone's profits get wounded in this war.

In : 848FINACE 


Tags: etf stocks wallstreet goggle tesla nadex e-trade td ameritrade charles schwab gopro problem mainstream extreme robinhood snacks 
 
 
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