GoPro (GPRO) Signs Multi-Year Partnership With Red Bull

In a major relief to action camera maker GoPro, Inc. (NASDAQ:GPRO) , shares of the company surged 4.9% to $9.71 following the news of the signing of a multi-year global partnership with European energy drinks company Red Bull. The companies inked an exclusive marketing and promotion deal that will cover critical areas including content production, distribution, cross-promotion and product innovation.

The agreement requires Red Bull to gain certain “equity” in GoPro and in return provide the latter with “point-of-view imaging” technology covering media production and events for the energy drinks. Also, the agreement entails the sharing of content rights on jointly produced events by the companies. This implies, GoPro will now have access to more than 1800 Red Bull events in over 100 countries, available on the companies’ distribution network such as The GoPro Channel, Red Bull TV and Red Bull.com.

This partnership is a strategic one for GoPro as it believes its interests and vision are closely aligned with its partner’s. Meanwhile, we believe that this partnership will help GoPro forge ahead with its plans of transforming itself into a ‘content maker’. Being a sponsor of extreme and grueling sports events like automobile racing, BMX, skateboarding, Red Bull will provide the ideal platform for the capturing of cutting-edge photography that GoPro cameras are designed for.

We believe this recent partnership is part of GoPro’s strategy to invest in talent, technology, software and innovative products via a spate of deals with athletes, sponsorship events and tie-ups with industry giants. Earlier this year, the company had inked a patent licensing agreement with Microsoft Corporation (NASDAQ:MSFT) that will allow it to access certain file storage and system technologies patents from Microsoft Technology Licensing. Also, the company is gearing up for another season with MotoGP, the world's premier motorcycle racing championship with huge international following.

Despite these bullish factors, GoPro is currently grappling with issues like the inability to swing back to preceding growth levels and foray beyond its trademark action cameras. Also, the company has been losing market to cheaper and better alternatives while fierce competition from the likes of Sony Corp. (NYSE:SNE) raise concern. In addition, the deferment of the release of the much-anticipated consumer drone Karma to the later half of this year is not going down well with investors.

Currently, GoPro carries a Zacks Rank #3 (Hold). A better-ranked stock in the industry is Dolby Laboratories, Inc. (NYSE:DLB) with a Zacks Rank #1 (Strong Buy).