The Future Of The Camera Is GoPro (NASDAQ:GPRO)

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By Mark Michaels on September 3, 2014 Company, Technology & Software

GoPro (NASDAQ:GPRO) is a company that has galvanized the excitement of investors and offered customers a unique and sensational experience. The company is based in the United States, and manufactures and sells high definition cameras that are often used in extreme sports or activities that capture point of view footage.

However, GoPro is not just an typical hardware company selling a consumer product. To quote Nicholas Woodman, the chief executive officer of the camera company, GoPro is a revolutionizing experience where more and more people around the globe are capturing and sharing their experiences in life; they are immersing and engaging viewers in the footage of their life experiences, and taking an audience on a ride.

Here are some of the reasons why GoPro’s stock is growing and why the company is so incredible.

1. GoPro’s earnings and finances are holding up strong in a sluggish economy. While the economy is looking in better shape than before, throughout this year it has certainly been far less than perfect. Given this economic barrier, the company’s earnings have thrived. During the last quarter, the company’s success in operating results can be traced back to the greater demand for the company’s new gadget, the new Hero 3+ Black Edition, as well as the accessories that go with the camera, which enable the camera to capture the footage of some of the most engaging and scintillating shots.

The company has several financial metrics that would convince many investors to buy into the stock.

The company’s revenue in the second quarter of the 2014 fiscal year was $244.6 million, an increase of 38.1 percent from the $177.1 million in the second quarter one year ago in the 2013 fiscal year. Its second quarter revenues also increased by 3.8 percent from $235.7 million in the first quarter of this year.

The gross margins in the second quarter of 2014 that did not follow GAAP had grown 42.2 percent, which is an improvement from the 32.3 percent in the same quarter of 2013, and also an improvement from 41.4 percent in the first quarter of 2014.

The company’s operating income in the second quarter of this year was $17.8 million, which was an improvement from the $3.2 million loss in the same quarter of 2013.

The company’s cash flow for this quarter came in at around $104.9 million, having jumped by $77.6 million from the second quarter of last year. It did, however, falls by $6.3 million from the first quarter of this year. It is important to note that the results reported in the second quarter report does not take into account the $200.8 million that the company received on July 1^st due to the proceeds from its initial public offering.

Additionally, GoPro is tearing down the walls in markets globally. The international revenue as a percentage of its revenue has risen from 37 percent in 2011 to 49 percent in 2013 when its sales grew from $86.6 million to $483 million.

Currently, the analyst consensus ratings for GoPro is at 3 Buy ratings, 6 Hold ratings, and 0 Sell ratings, as well as 0.07 for its outlook earnings per share for the next quarter and $48.50 for its target price.

2. The company’s success depends on its ability to use footage and experiences from users for advertising and marketing purposes.

Currently, GoPro controls about 30 percent of the market share for camera sales, with sales of 4.1 million units in 2013. On the other hand, Sony only holds 20.8 percent of the same market. With the addition of the action camera market, GoPro leads this space with a market share of 47 percent, while Sony holds only 6.5 percent.

The reason for this is because GoPro has contacted more than 25,000 retail locations in order to gain attraction to a certain group of interested and potential customers. The camera company has a presence in snow and ski shops to appeal to snow sports enthusiasts, surfing shops to markets themselves to surfers, as well as major retail stores like Target, Amazon, Best Buy, Wal-Mart, etc, to sell to the average individual.

GoPro has essentially imbedded itself within the culture of each particular sports niche, while also appealing to the typical buyer. The key to this method is how the company markets and advertises its products. It’s ads are set up in a way so that the videos are being displayed on a small television right above the products, and all of the footage shown are clips that actual customers have caught on film and submitted. This method erases any smidgen of doubt about the capabilities of the camera that the customers is considering purchasing, and whether or not it can really capture and produce the same results that motivated them to purchase the item in the first place.

Another useful way that GoPro advertises its cameras is by allowing the customers that purchase and use the GoPro cameras to share their videos online via the internet. On the GoPro Facebook page, which has hit just under 8 million likes, users can share their experiences that are captures via GoPro with the world. The company has also set up a variety of other channels, including Xbox One and Pinterest, which enables people to engage with the product and footage socially, while also advertising the power of their product.

Society tends to associate specific products with specific companies. In the case of cellphones, people generally think of Verizon, AT&T, or Apple. For construction supplies, consumers usually think of Lowes or Home Depot. And for cameras, especially those that can keep up with whatever moment or experience that presents itself to you in life, we have started to think of GoPro.

The action camera maker has branded itself as the go to camera for extreme sports, it’s a bility to go where other cameras cannot, and its sharp image. In addition to its other outstanding capabilities, the GoPro camera is small and compact, and is able to be mounted practically anywhere. Just as how Apple has built a branded ecosystem and a loyal customer base via its marketing plans, GoPro is doing the same. Not only is the Facebook page of the company popular, but it is also pulling YouTube in the same direction.

According to Kevin Allocca, the leader of the culture & trends department at YouTube, many brands have spent a lot of time trying to learn about, understand, and engage with their community on YouTube. GoPro has actually created their brand using that community as a base and taken it to build the creative community.

In just the first quarter fo 2014, YouTube reported more than 6000 GoPro uploads each day. This resulted in more than 1 billion views and 50 million hours of watch time. These figures were achieved in only 3 months. The number of GoPro videos on YouTube has grown by 160 percent year over year, its views have increased by 200 percent, the the time watched jumped by 270 percent.

While these figures may seem irrelevant now, they actually explain what is happening and point to what is to be expected in the future. GoPro is growing a social revolution of an entirely different way to have social engagement. Slowly but surely, GoPro is taking this market by storm.

3. Versatility means a better product.

The last point is versatility. Versatility is a crucial factor to GoPro’s success, because the product is not limited by the barrier of the sports market, but can grow to fit the uses of almost anyone and anything and captures events that happen on a day to day basis.

GoPro is also coming up with new technologies that open up the market for a variety of different applications. Take the pet market, for example. Pet owners in the United States spent about $56 billion in 2013 on their pets. GoPro has tried to enter this market with cameras that can be mounted on a dog to capture its point of view. By trying to tap into this market, the company is introducing more exposure, more customers, and more sales, which can all increase its bottom line.

The bottom line in this case is that GoPro is not marketing and selling only a product. Rather, its selling an experience. It is selling the ability to take an individual’s experience and sharing it with their family and friends in a way that a photo could not do.

While it would be unwise to completely disregard the challenges that GoPro faces, but it is likely that the movement that GoPro has created will succeed, and the company will stay around for a long time.