UPDATE: Wall Street's embrace of Roku ignores the ghosts of GoPro, Fitbit IPOs
By Therese Poletti, MarketWatch
Hardware companies face tough transition to become more software-focused
Wall Street's huge welcome for Roku Inc.'s initial public offering is reminiscent of its embrace of the once-hot IPOs of GoPro and Fitbit, and investors would be wise to step back and look at both of those companies are now faring.
Roku's valuation has doubled (http://www.marketwatch.com/story/roku-ipo-valuation-doubles-in-less-than-two-sessions-2017-09-29)since its IPO on Thursday. Shares fetched twice the IPO price on Friday, pushing the company's market-cap above $2.5 billion
GoPro Inc (http://www.marketwatch.com/story/zulily-rises-gopro-awaits-public-debut-2014-06-26).(GPRO) , which went public in 2014 (http://www.marketwatch.com/story/zulily-rises-gopro-awaits-public-debut-2014-06-26) and Fitbit Inc., (FIT) which came to market in 2015 (http://www.marketwatch.com/story/fitbit-shares-surge-55-on-their-first-day-of-trade-2015-06-18), saw their shares soar after their initial stock market debuts, and for the first few months of trading, but are now priced well-below those highs. Both of these companies make a specific hardware product with low profit-margins, but have grand schemes to expand beyond their hardware horizons.
In GoPro's case, the developer of sports cameras spent millions of dollars creating an entertainment business. Its move into content was to be based on the extreme sports videos shot from GoPro's cameras by its customers, including professional athletes and celebrities. But last year, GoPro closed it down (http://www.marketwatch.com/story/gopro-to-cut-15-of-jobs-in-restructuring-2016-11-30), leading to layoffs and restructuring charges. Nowadays, GoPro, which came to market at $24 a share, trades around $11.04, a plunge of about 70%, while the Dow Jones Industrial Average is up 32% over the same period.
Meanwhile, Fitbit earlier this year announced a big move into software, as it tries to create an ecosystem, a la Apple Inc.(AAPL) At the Consumer Electronics Show in January, Fitbit unveiled a social feed for Fitbit users, telling MarketWatch in an interview that users of its wearable fitness trackers were inspired by social motivation.
This summer, Fitbit announced the Fitbit Ionic, (http://www.marketwatch.com/story/fitbit-introduces-300-smartwatch-in-challenge-to-apple-2017-08-28) a smartwatch to compete with the Apple Watch and to compensate for the flagging sales of its older devices. The Fitbit smartwatch will also rely upon an ecosystem of software apps, but it was criticized at launch (http://www.marketwatch.com/story/fitbit-stock-falls-after-reviews-for-ionic-smartwatch-2017-09-19)for, among other issues, the small number of apps available. Shares of Fitbit have tumbled about 78% from its IPO, while the Dow is up about 25% over the same period.