GoPro, Inc. (GPRO) Stock Foretells Company’s Success

Nick Woodman, founder of GoPro, Inc. (GPRO), has officially become a billionaire.

After the sports camera company went public Thursday, June 26^th, at the price of $24 per share, the company’s share price has been on the rise ever since. It jumped 13.4% on Monday, then another 13.4% on Tuesday – that’s a total of almost 69% from its starting IPO price. The company’s net worth is estimated at $5 billion – much higher than its initial valuation at $2.9 billion. The company offered 17.8 million shares to raise $427.2 million.

Nick Woodman still owns 52 million class-B shares, and thus has a 48% voting right in the company. Riverwood Capital, a private equity firm, owns $650 million worth of the company’s stock. Foxconn Technology Co. Ltd holds a $425 million stake.

GoPro was founded on $200,000 from Woodman’s father in 2004. Since then, that investment has grown to $280 million. The company released its first hi-def camera in 2009, and has sold 8.5 million units. Of that number, 3.8 million units were sold last year in 2013 alone.

GoPro cameras are light, small, and waterproof. The company targets sporty people, such as skydivers, hikers, surfers, and those who lead adventurous and active lives. GoPro devices allow the user to capture photos and record video during these active and sporty activities. One camera costs from $200 to $400.

Charlie Anderson, the only Wall Street analyst covering GroPro’s stock, expresses his concerns about the stock. He attributes the stock’s swift rise to “euphoria” because of the limited supply of shares. Anderson is worried about the stock’s sudden jump – his target price is $28, but the stock price has already surpassed $40.

GoPro’s plans for the future include becoming a media company that capitalizes on user-generated content. In 2013, users uploaded their recorded footage videos that were nearly 3 years long in combined length. Using this content, GoPro plans to charge for advertising. With millions of social media subscribers, the camera company can make money by distributing original content as well as user generated content. This new source of revenue may seem insignificant at first, but in the future it will be a significant portion of the company’s income stream.

However, GoPro faces substantial struggle to compete against smartphone producers who sell high-def cameras on par with GoPro cameras.

In 2013, the company reported nearly $1 billion in revenue, which is an increase of 88% each year. The price of the stock is currently 52 times GoPro’s expected earnings for this year.

Investors who were not able to buy the company’s stock before the IPO are trying to buy in after the stock has started trading, and they are pushing up the stock price. GoPro is expected to achieve strong results in the upcoming quarters. This is garnering the interest of many large mutual funds and hedge funds because they recognize that, unlike many other fast rising tech companies, GoPro is profitable.