Technology stocks in the US have been smashed over the past few months, and digital imaging oriented businesses have not escaped the carnage, with Adobe, Getty Images and Shutterstock all dropping more than half their value.
Getty Images has actually fallen from a high of US$37.88 in August to a low of $4.31, and at time of writing (14/11) was at $5.75. What will be troubling the Getty board is that the share price over the previous 5 years was fairly stable at around the US$10 mark. There was a big spike in the share price following (but not necessarily linked to) Getty’s purchase of free stock image operation Unsplash. This saw the share price spike to over $30.
From an all-time high of just under US$700 in November last year, image/document editing software giant Adobe slipped to below US$300 and today sits at $321.
Adobe delivers monopolistic gross margins of 87 percent, so it’s certainly not struggling, but this year purchased a business called Figma for US$20 Billion. Meh. Figma is an collaboration platform for design teams (‘Google Docs for designers’) which was shaping up as a potential Adobe competitor. Most analysts said was way over what it was worth, as it was valued in 2021 at around US$10 billion. Still, with rivers of gold streaming in from the world’s visual creators and unlikely to dry up anytime soon, why let a lazy US$10 bil get in the way of continued world domination. The majority of stock analysts have Adobe as a ‘Buy’.
Shutterstock, one of the least-loved brands in some segments of the photographic community, has a more favourable review from shareholders. It has had a less dramatic share price drop, falling from a peak of US$125, down to US$45 and now sitting at US$51.
While these three businesses have suffered significant share price ‘corrections’ they are fundamentally sound: well-established, with prospects for both natural revenue growth, and growth from acquisitions.
The same can’t be said for action camera maker GoPro, which seems to be facing natural contraction rather than natural growth. According to an article in Yahoo Finance, ‘over the past five years, revenues have declined around 2 percent annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 4.1 percent decline in revenue until the end of 2023.’
While GoPro is still making a profit, it’s on declining sales and in an increasingly niche market. Unless GoPro can tranform itself in some way, it’s hard to see where the growth will come from. From a high of over $12 in early 2021, GoPro is down to $5.41. It needs another hero.