This Rival To GoPro's Karma Doesn't Require FAA Registration

By Markets

Zero Zero Robotics recently unveiled the Hover Camera Passport, a foldable drone whichhovers automatically to capture pictures and video after being released. The device, which can be controlled with a smartphone app, uses a combination of AI, sonar, and a downward viewing camera to capture the subject. It can also be programmed to circle a subject to create a 360-degree wraparound video.

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Image source: Zero Zero Robotics.

The $600 drone is much cheaper than GoPro's (NASDAQ: GPRO) $800 Karma drone, which lacks a built-in camera. The bundle, which includes the Hero 5 Session, costs$1,000, while the one with the Hero 5 Black costs $1,100.

Like the Karma, the Hover Camera Passport films 4K video, but it weighs a mere 242 grams -- eight grams below the FAA's registration threshold of 250 grams for consumer drones. The Karma, which weighs1,006 grams on its own, must be registered with the FAA.

Should GoPro be worried?

GoPro cameras are popular among athletes and outdoor enthusiasts, but converting mainstream consumers -- who mainly use smartphones to take pictures and videos -- has been difficult. With the Karma, GoPro targets an even smaller niche marketof affluent aerial photographers.

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To match the consensus estimate of $676.5 million in sales for its fourth quarter -- which would represent 55% annual growth -- GoPro must sell about 850,000 stand-alone Karmas or 620,000 Karma/Hero 5 Black bundles. That's a very lofty target, since DJI Innovations, the biggest drone maker in the world, only sold around one million drones last year.

Image source: GoPro.

The Karma's "killer feature" initially appeared to be its portability when it was unveiled last month. Unlike DJI's flagship Phantom drones, the Karma could be folded and easily carried in a backpack. But shortly afterwards, DJI unveiled theMavic Pro, a smaller foldable drone which is both lighter and cheaper than the Karma. It also automatically tracks and follows the user -- something theKarma can't do.

Zero Zero Robotics' Hover Camera Passport is lighter and cheaper than both the Karma and Mavic Pro, and has a form factor which could be more easily embraced by smartphone users. The lack of FAA registration requirements also removes another annoyance for mainstream shoppers.

Did GoPro just get blindsided?

GoPro seemed to be so focused on competing with DJI that it ignored the growing demand for "throw and go" hovering cameras. In late 2014, a tiny "selfie drone" called Nixie won the $500,000 grand prize at Intel's (NASDAQ: INTC) Make it Wearable competition. The tinydrone, which is powered by Intel's Edison chip, initially clings to a user's wrist, but can unfold and take off to capture photos and videos at a distance.

The Nixie isn't commercially available yet, but it inspired other start-ups to develop similar devices. Lily, a start-up which was developing a larger "throw and go" camera drone with auto-follow features, racked up $34 million in pre-orders bythe end of 2015. Another start-up, Staaker, is also taking pre-orders for an auto-follow drone which costs about $1,200.

The Hover Camera Passport seemingly represents an evolution of those ideas, as it turns drone cameras into lightweight "flying selfie sticks". While it's unclear if the Passport will work as advertised, its form factor could convince other companies to produce similar devices which weigh less than 250 grams -- making GoPro's "portable" Karma look very bulky.

The holiday quarter could be disappointing

GoPro has high hopes for the holiday quarter, which it claims will return the company to quarterly profitability after four consecutive quarters of losses. But there are ominous signs on the horizon.

Amazon (NASDAQ: AMZN) recently halted sales of the Hero 5, reportedly due to a pricing dispute between the two companies. Appleis alsoshowcasing DJI's Phantom 4 and Mavic Pro at its stores with big displays and in-store training sessions -- which will steal a lot of thunder from GoPro's Karma.

Lastly, tiny hovering cameras like the Hover Camera Passport could steal away casual users who simply want to play with flying selfie sticks without learning how to fly a drone. Therefore, investors hoping that the Karma and Hero 5 will lift GoPro back to profitability during the holidays should heed these headwinds and take the company's promises with a grain of salt.

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Leo Sun owns shares of The Motley Fool owns shares of and recommends, Apple, and GoPro. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Intel. 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.