Is GoPro Worth Buying?

GoPro (GPRO) announced fourth quarter ended December 31, 2015 total revenue of $436.6 million which is below the projected guidance range of $500 to $550 million and up 9.1 percent sequentially from $400.3 million in third quarter of 2015 and down 31.1 percent year-over-year from $633.9 million in fourth quarter of 2014. Going forward, GoPro has also provided revenue guidance for first quarter of 2016 and estimates it in the range of $160 to $180 million.

A closer look

GoPro declared fourth quarter of 2015 net loss of $11.4 million or $0.08 diluted loss per share, down 131.1 percent sequentially from net income of $36.6 million or $0.25 per diluted share in third quarter of 2015 and down 107.9 percent year-over-year from net income of $144.9 million or $0.99 per diluted share in fourth quarter of 2014.

GoPro reported continued year-over-year decline in both its top and bottom lines primarily due to slower company growth by the end of the year and thus, requiring it to develop innovative software solutions to assist the customers access, edit and offload their GoPro material.

GoPro, SkratchTV, and the PGA TOUR recently declared an international agreement to broadcast innovative never-earlier-seen perceptions and exciting golf matches episodes to all the golf fans across the world.
This solid partnership is expected to allow GoPro broadcast new views about the game, and to display TOUR stories, and regarding golf culture, in an innovatively fresh way.

Although, GoPro has slashed the price for the company’s newly launched Hero4 Session camera to assist in expanding holiday sales but, there appears to be only little confidence for some of the company’s key products.

The price cutting of its innovative Hero4 Session camera to boost sales is only expected to have little impact on the company’s top line growth. However, the strategic contract of GoPro with other key broadcast companies is believed to drive significant customer traction for its innovative camera solutions while delivering outstanding top line growth and attractive shareholder returns.

Recently, the shares of GoPro had declined notably in spite of significant sales achieved all through the market. In addition, GoPro has signed a key patent licensing contact with Microsoft Corporation to develop advanced system technologies and some major file storage methodologies.

What next?

Moving ahead, there are several reasons to be positive about the long-term growth prospects of GoPro including, the extremely manageable stock price position, significant brand value and the company’s superior products, notably huge growth potential and the stock’s attractive undervaluation.

Despite, the short-term growth prospects of GoPro appears to be somewhat shaky still, the company has extremely well-established longer term growth potential being supported by its strategic technology partnerships with other major technology giants such as, Microsoft which is further supported by an attractive company valuation, drawing several new investors to make equity investments in the stock.

During the fourth quarter of 2015, GoPro repurchased nearly 1.5 million shares of its Class A capital stock priced at an average of nearly $23.05 per share and depicting net share buyback of about $35.6 million shares by the end of the quarter and in line with its continued commitment to deliver attractive shareholder returns. Further, GoPro is left with $264.4 million worth of share buyback authorization.

The consensus estimate among 18 polled investment analysts evaluating GoPro Inc. suggests investors to “Hold” their position in the company. This consensus estimate is maintained since the investment analyst’s sentiments declined on Jan 14, 2016. The earlier consensus estimate suggested that the company will outperform the market.

A majority of the key investment analysts are extremely positive about the long-term growth prospects of GoPro, primarily being encouraged by the company’s notable expansion potential with rising customer traction for its superior camera products. Moreover, the company seems highly focused on returning a majority of the invested capital to its key stakeholders through dividends and planned share repurchases.

Conclusion

Overall, the investors are advised to “Hold” their position in GoPro Inc. considering the company’s significant growth potential being supported by a solid financial position with no debt and huge total cash position of $474.06 million, encouraging the company to make future growth investments. The profit margin of 2.23% seems satisfactory. The PEG ratio of 0.85 indicates somewhat slow company growth compared to solid industry’s growth average of 1.20.
Published on Feb 16, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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