Can GoPro Disrupt a Billion-Dollar Market?

By Markets

Karma drone. Image source: GoPro.

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GoPro (NASDAQ: GPRO) is finally in the drone game. And the company has the potential to upend the burgeoning consumer market for drones that could bring in billions of dollars in revenue.

Today, DJI is the biggest player in commercial drones, with about $1 billion in annual revenue and a $10 billion valuation. GoPro may finally be able to compete with that dominant position.

A drone consumers can pick up and go

What GoPro has managed to make is a drone that's attractive to consumers at a price point that won't break the bank. But it's the added features that could make it a hit.

The Karma drone starts at $799, but you can add a Hero5 Session for a total price of $999, and a top of the line Hero5 Black with the drone is $1,099. That's less than DJI's Phantom 4, making it a compelling price point.

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Karma drone and remote. Image source: GoPro.

As far as controls go, GoPro has an advantage there as well. DJI's remote requires a separate tablet to view video and it generally a clunky design. Karma's simple clamshell remote with a built-in screen makes it easy to pick up the drone and go.

Beyond the drone itself, Karma comes with a carrying case and Karma Grip that allows a consumer to take the camera off the drone and capture stabilized images by hand. The stabilizer may be used more often by many consumers than the drone itself given the fact that it can attach to other GoPro attachments. DJI's attached gimbal gets stable footage on the drone, but is useless when the drone isn't in flight.

Where GoPro falls behind

Karma has some advantages over DJI's Phantom 4, but it falls behind in other areas. Notably, Phantom 4 has a "follow me" feature and also includes obstacle avoidance. Those are key technologies in drones that make them easier to operate, particularly for the action sports GoPro is known for.

What isn't yet known is how customers will balance Karma's advantages and its deficiencies versus competitors. Holiday season 2016 will be the first indication how this product is catching on.

The huge market opportunity

It's tough to gauge just how big the drone market is for GoPro, but we know it's big. DJI reportedly sold about $1 billion worth of products over the past year, so that's a good baseline to measure the market for a single company.

Then consider that GoPro shipped 5.1 million cameras in the past year. If 10% of those customers buy a drone for $799, Karma revenue would be $400 million. And that doesn't include additional accessories, warranties, or cameras a customer may buy.

Late last year, I speculated that drones could be a $1 billion market for GoPro before long. And with Karma selling at a compelling price point with compelling features for consumers, I don't think that's out of reach. The holiday 2016 season will be big for GoPro, and there's a lot of upside if Karma is a big success.

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Travis Hoium owns shares of GoPro. The Motley Fool owns shares of and recommends GoPro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.