GoPro Inc. - Ordinary Shares - Class A

Fundamentals

Since going public, GRPO has seen revenue increase 65% and net income (after tax profit) rise 450%. But, GoPro stock is now at the price it closed at on its first day of trading, down 67% from its highs and down 43% in the last three-months, alone. Here is a chart of revenue in the blue bars and net income in the orange line through time. Note that both are at all-time highs.


News broke on September 14th that Northland Capital Markets’s Gus Richard called GPRO "a compelling acquisition target for Apple (AAPL)" because of its "growing sports content and video ecosystem" (Source: Barron's). Remember, GPRO is a hardware maker, and there is no better hardware maker in the world than Apple.

But the valuation proposition for GPRO is getting more compelling everyday well beyond a takeover rumor. The company has done something almost every other young technology company (public or private) has not been able to do, and that's turn a profit. In fact, over any twelve-month period, the company has never reported a loss. Further, the company invented a new product category for cameras ("action camera"). But there is so much more to this company and a wonderful angle on it that is has been totally discounted to this point.

GPRO reported earnings on July 21st after the close and beat estimates handily and blew out its own guidance, yet since that time the stock is down an astonishing 50%. The company sold 1.65 million capture devices in the quarter, which was a 93% increase year-over-year. Further, while North American sales showed powerful growth at just under 40%, international growth rose well over 100%, with 183% growth in the Asia-Pacific region. International sales now represent more than half of revenue. Here is a price to sales chart, through time.


But here's the really compelling turn of events. On July 23rd, live video-streaming app Meerkat announced a beta program that enables some GoPro users to live-stream their footage directly from their GoPro device. Meerkat competes with Twitter's (TWTR) Periscope and the added capability adds a wonderful social dimension to GPRO. In fact, earlier this year, GPRO launched a streaming channel on the LG Smart TV app and signed a deal with Vislink to enable broadcasters to live-stream GoPro content during big events (Source: MarketWatch).
I do note that only 14% of GPRO stock is owned by institutions although its short interest has dropped from insanely high levels to now a quite normal one, with a 40% reduction in short float from July to August. Also, Barron's likened GoPro's point-of-view cameras to BlackBerry smartphones and said they were a "one-product wonder". The article also cited concerns about mounting competition from companies like Apple (even as others point to GPRO as a takeover candidate for Apple) (Source: Business Insider).