A Blog by Jonathan Low

 

Dec 24, 2015

Gadget Overload: Are Gizmos Losing Their Appeal?

Five of the six gadget makers in the Russell 300 are down this year, including GoPro. And it's not just the fun little guys: Apple is down 3% for the year.

The issue may be that people are finding they have enough - even too many - gadgets and are tired of lugging around all the specialized equipment plus their supporting dreck like multiple power cords.

With household incomes flat or down for the majority of consumers across most of the developed world, it may be time for a pause meaning those declining unicorn valuations are not just a financial technicality. JL

Matt Krantz reports in USA Today:

Investors are clear on which gizmo makers are worth owning: None. It's been a bust of a year for investors in gadget makers. Five of the six consumer electronics stocks in the Russell 3000, including camera maker GoPro (GPRO) are down this year. They're not down a little. An equal-weighted index of the stocks is down more than 21%.
Plenty of Web sites are telling you which digital gadgets to buy. But investors are clear on which gizmo makers are worth owning: None.
Despite the hype, it's been a bust of a year for investors in gadget makers. Five of the six consumer electronics stocks in the Russell 3000, including camera maker GoPro (GPRO), headphone maker Skullcandy (SKUL) and GPS maker Garmin (GRMN) are down this year, according to a USA TODAY analysis of data from S&P Capital IQ.
They're not down a little either. An equal-weighted index of the six stocks is down more than 21% this year - a horrible performance next to the Standard & Poor's 500, which by itself is off 1%. The consumer electronics stocks are down 2.5% just since Black Friday. The only stock in the consumer electronics group that's up this year is ZAGG (ZAGG), which makes coatings to help people protect the screens of devices they already own. Those shares are up 61% this year and 5.1% since Black Friday.
Seeing such poor performance from gadget maker's shares is a big surprise for some investors - who have thought demand for digital objects of desire are pushing down demand for more traditional items. But that's been far from true. The S&P 500 Apparel Retail index is actually up 0.4% this year. Not great - but better than the gadget stocks.
Others might suspect these dedicated consumer electronics companies are getting hurt by new entrants like activity tracker Fitbit (FIT) as well as Apple (AAPL) - which seems to keep adding features to its smartphone that erode the value of one-off devices. But these two stocks aren't doing much better. Shares of Fitbit are essentially flat from their first day of trading following the June initial public offering and down 44% from their high this year. Apple, too, has snapped its winning streak for investors and is now down 3% this year.GoPro continues to be the posterchild of the cooling interest in dedicated consumer electronics products. The stock is down a death-defying 71% this year as just about everyone who wanted a camera to record their extreme sports escapades has one (or more). The company's revenue growth over the past 12 months is still a respectable 62%, but that's well below the 263% growth in 2011. The future is the more troubling part. Analysts are now expecting GoPro's revenue to gain just 11.6% in 2016.

That's hardly the kind of growth that's worth recording - or apparently - investing in.
CONSUMER ELECTRONICS STOCKS ARE STRUGGLING
Company, symbol, % since Black Friday, % YTD
GoPro, GPRO, -8.3%, -71%
Skullcandy, SKUL, 11.3%, -49.5%
Garmin, GRMN, -4.4%, -31.4%
Universal Electronics, UEIC, -4%, -21.1%
Harman Int'l, HAR, -14.8%, -16.8%
ZAGG, ZAGG, 5.1%, 61%
Source: S&P Capital IQ, USA TODAY based on consumer electronics stocks in the Russell 1000

0 comments:

Post a Comment