GoPro may be selling fewer cameras these days, but at least it has learned how not to be left holding the bag.

The action camera maker has been shifting its business to a subscription-based model over the past two years and has seen some success.

The company reported in its third-quarter results last week that it now has a little over 1.3...

GoPro may be selling fewer cameras these days, but at least it has learned how not to be left holding the bag.

The action camera maker has been shifting its business to a subscription-based model over the past two years and has seen some success.

The company reported in its third-quarter results last week that it now has a little over 1.3 million paying subscribers to its service that bundles a new camera with cloud-based storage, access to a branded streaming channel, enhanced warranty coverage and discounts on other gear. That is more than double the number of subscribers the company claimed at the same point a year ago. GoPro also projected the addition of at least 36,000 subscribers in the fourth quarter, double the pace of additions in the recently ended quarter.

Investors who prefer companies with a recurring-revenue model have taken notice: GoPro shares are up 51% this year. Its subscription service still depends on GoPro’s ability to sell new cameras, though. They face increasing competition every year from continuously improving smartphone cameras. GoPro’s Hero9 cameras that launched last year and the new Hero10 that went on sale in September are considered solid-enough upgrades, but GoPro is still expected to ship just a little over 3 million camera units this year and next, according to consensus estimates from Visible Alpha. That is less than half the company’s peak of 6.6 million units in 2015.

Luckily, among the mistakes GoPro has learned from is how not to get caught with excess goods. Reported inventory of $120.9 million at the end of the third quarter is 15% below the inventory levels averaged during the launch quarters of the last five Hero cameras. And Erik Woodring of Morgan Stanley estimates the company’s channel inventory this year will be less than half of last year’s. Mr. Woodring upgraded GoPro’s stock to an equal-weight rating on Thursday, noting that the company’s fourth-quarter sales projection “implies GoPro underships vs. demand and drains camera channel inventory below year-end target levels.”

Action cameras are best not left on the shelf.