GoPro's Problem: Mainstream > Extreme

Wednesday, October 2, 2019 by Robinhood Snacks | Disclosures

"What do you mean cabinets don't matter, Meg?"

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Hey Snackers,

Coconut Cheerios want to be the new PSL. They're coming this month.

Stocks dropped Tuesday after an econ report that US manufacturing fell to its worst level in a decade.

1. 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."


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.


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 = 16%
  • TD Ameritrade = 25%
  • 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).

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.


Cabinets don't get enough appreciation... Holding up Nana's china like a never-ending bench-press is hard. But that's Michigan-based Masco Corp's bread-and-butter — producing home furnishings under brands like Hansgrohe, Delta, and Behr. Now Masco's selling its window division for $725M. And that's critical to its grand recession-proofing plan.

Homes get built, repaired, and remodelled... Masco wants to focus on those last 2 and sell the first. Here's what's in and what's out of Masco's feng shui makeover:

  • What it's selling: The parts of homes that only happen during new-house construction, like windows, doors, and kitchen cabinets.
  • What it's focusing on: The parts of homes that get repaired and remodelled over the years on existing houses, like paint, lighting fixtures, paint, showers, sinks, and more paint.

"But Masco's cyclical, and a recession could be coming"... Execs at Masco hate hearing that, but it's kind of true. Masco is 'cyclical': business is good when the economy is good, bad when it's bad. During the '05-'11 housing downturn, fewer homes were built so Masco's profits dropped. Masco's sprucing up its business model in order to recession-proof itself — and shut up Wall Street critics.

What else we’re Snackin’
  • Out: Credit Suisse loses an exec because of a spying scandal with the Swiss bank
  • Bzzzz: UPS snags the 1st broad FAA approval for drone delivery
  • ETA: Papa John's decides it wants to do one thing completely different than Domino's: let someone else deliver instead of relying on its own delivery team
  • Down: Uber and Lyft shares dip to record lows after WeWork and Endeavor canceled their IPOs
  • Re-cast: Netflix renews Stranger Things for a 4th season and signs its creators to a nine-figure deal
  • $$$: PayPal acquires 70% of China's GoPay, gaining access to digital payments across the Great Wall (not easy to do — China's Central Bank had to approve)
Snacks Daily Podcast

Snacking deeper into GoPro's moat issue, Schwab's price war, and Masco's home makeover


ID: 969195

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