Forget the Skeptics; It’s Time to Be Bullish on GoPro Stock
GoPro, Inc. (NASDAQ:GPRO) has been down in the dumps lately, with a 60% decline in the GPRO stock price since the company’s initial public offering. But this might be a positive signal for potential investors.
When the GoPro stock price was at $33.00 per share in September, some cautiousness on the part of investors was warranted, but now that the price is sitting at $25.00, there has never been a more opportune time to take a second look at this undervalued company.
Is It Time to Take a Second Look at GoPro Stock?
In addition to durable camera manufacturing and sales, GoPro has begun an expansion into media. The company announced in September that it would be monetarily compensating athletes and various other performers for producing and uploading content to GoPro’s media platforms. (Source: “What Spotify Can Learn From GoPro,” Forbes, November 5, 2015.)
High quality user-generated content will be a solid foundation for the company to establish itself as the ultimate vendor of adventure videos, an evolving type of media for which GoPro cameras have been vital.
If the company is able to successfully pull off this ambitious plan and cross into the social media realm, it could spell big gains for the GPRO stock price. With camera sales increasing the number of people making and uploading videos and videos drawing in more camera sales, GoPro may have a sustainable and winning formula from which to rise in value and assure its survival into the long-term.
But it doesn’t stop there, because GoPro has other robust developments in the pipeline. The company has invested $67.3 million in the form of research and development in the quarter of 2015. (Source: “GroPro Spherical Solutions,” GoPro, last accessed November 9, 2015.) This represents approximately 17% of the company’s revenue, which means that GoPro is serious about expanding. The products coming out of this research and development are substantial, and promise to revolutionize media. Examples include an upcoming 16-camera GoPro rig which creates virtual reality videos by stitching together digital videos. (Source: “GoPro is now selling its crazy 16-camera virtual reality rig,” The Verge, September 8, 2015.) But there is also a next-generation virtual reality camera under development, as well as the launch of the GoPro drone in 2016.
What About GoPro’s Financial Footing?
This might surprise you, but for a company which has suffered a drastic decline in its stock price, GoPro is doing remarkably well in the financial sense.
The issue is that GoPro, while performing well, is simply not living up to ever-growing expectations. While revenue rose by 43% to hit $400.3 million year-on-year, GoPro failed to live up to analysts’ expectations of $433.6 million. (Source: “GoPro Stock Plunges On Disappointing Q3 Results,” Forbes, October 28, 2015.)
Sounds a bit strange when you think about, doesn’t it? A company which was able to report a massive surge in revenue growth is devalued on the basis of not achieving an unrealistic figure. But it gets even stranger, because GoPro announced earnings per share of $0.25, up from $0.12 a year earlier. (Source: Q3 2015 Preliminary Earnings Results Summary, GoPro, October 28, 2015.)
Sales numbers rose sharply over 2014 figures as well. GoPro announced it had shipped 1.6 million capture devices in the third quarter of 2015, which is 46% higher over the same period last year. Total cumulative unit sales for GoPro stand at 17.9 million. GoPro App downloads also rose dramatically, with 2.7 million downloads, which represents a 75% surge year-over-year.
Here’s Why GoPro Stock is Undervalued
As of the time of writing, the GPRO stock price is sitting at $25.13, which is certainly a spectacular nosedive since its August 7th high of $63.06.
Now, in regards to almost any other company, a 60% drop in the value of its stock price would have me running for the hills. But that’s not the case here, because if you dig down a little deeper and do your research on GoPro, the GPRO stock price starts to look more and more undervalued.
Don’t believe me? Read on, because you just might be surprised.
What GoPro is sorely in need of at the moment is a better-articulated strategy for future growth, and it looks as if they’ve found their groove in this regard. If the company wants to survive and expand, it will need to grow past the action adventure camera game and build upon its plans to become a big-name media platform. Now, if GoPro is able to better explain how it plans to draw together its disparate social media, video sharing, and cloud computer services to durable camera production, then it will have a good shot at success.
The Bottom Line for GoPro Stock
When you combine high upside growth potential with a solid financial footing and positive future forecasts, GoPro starts to look more and more attractive as a solid stock pick. With the GPRO stock price sitting so low, this might be the best time ever to take a second look at a company which could likely soar next year. Couple this positive outlook with the above-mentioned research and development plans by the company, and it becomes clear why I remain so bullish on the GoPro stock price.