Investors Should Wait Before Buying Into GoPro Inc (NASDAQ: GPRO)

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By Mark Michaels on August 4, 2014 Technology & Software

Thanks to media hype, GoPro’s stock has been on the mind of almost every investor since the company’s initial public offering. However, it won’t be long until GoPro’s stock ticker becomes just like any other company stock on the market. It is then, that the company’s stock price will begin to normalize as well.

Ever since the company went public, the stock price has been extremely volatile due to upgrades, downgrades, and initial coverage from analysts and underwriters.

From the beginning, analysts and investors questioned the company’s ability to become a media company, and the CEO’s decision to sell so many shares into the IPO. Yes, the company does cater to the sports and extreme activities market, which produces truly unique content. However, the company should not automatically be labeled as a success.

Judging from the chart above, the company’s stock is nowhere near stability yet. And now, it seems that the shares are on the path to dropping below $40. Momentum players are still lingering after the company’s IPO, which is causing the price to swing so wildly. However, the price should normalize in the long run.

The company also just released their first earnings report as a public company on Thursday last week. The stock seems to have gone through a rough phase after the company released lackluster earnings report.

Its earnings for the second quarter beat out the expectations of analysts, but it netted a greater loss than the prior year. In after hours trading, the stock dropped just over 11%.

The company attributed $19.8 million on shareholders, or $0.24 per diluted share. The company posted profits of $11.8, or $0.08 per diluted share. This beat out expectations of analysts, which was $0.07 per share.

The company posted revenues of $244.7 millinon, an increase of 38.1% from the second quarter of 2013, which was $177.1 million. The company’s revenue also beat out analysts’ expectations fro $238 million in sales.

As soon as the report was released, the company’s stock crash. The greater losses confirmed investors’ worries about the direction GoPro was headed towards as a public company. The CEO and founder of GoPro, Nicholas Woodman, maintained that there was still a lot of room for growth and many huge opportunities overseas.

Some Key Facts To Consider

GoPro’s revenue exceeded the expectatiosn for the second quarter mostly due to strong sales in hardware accessories and its camera product, the HERO3+ Black camera. However, the number of sales of HERO products fell short of predictions.

It seems that GoPro’s product sales are on the decline as well. However, investors are hoping that the launch of a new HERO product will keep the company’s worth floating at its current valuation.

Nicholas Woodman is hyping up the company’s plan to build a platform that will enable users to quickly upload and store footage in the cloud. This will make it easier to convert the videos into YouTube clips. Woodman has also spoken of a possible deal with Roku and AppleTV.