Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

GoPro: This Is Not Flip Video All Over Again


GoPro filed its long-awaited IPO prospectus with the SEC.

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

I've been very eager for the IPO of action camera maker GoPro. Just yesterday, the company filed its S-1 with the SEC, so we can finally dig into one of the few major growth stories in consumer electronics.

GoPro will trade on the Nasdaq (NASDAQ:NDAQ) under the ticker GPRO, and is aiming to raise $100 million with its IPO.

Let's address a big topic first -- the possibility that GoPro will go the way of Flip Video, which produced an incredibly popular line of compact digital video cameras in the 2000s.

Cisco Systems (NASDAQ:CSCO) bought Flip for $590 million in 2009, but shut it down in 2011 after the Apple (NASDAQ:AAPL) iPhone and other smartphones ate the market for small camcorders.

However, in many cases, a GoPro can't be replaced by a smartphone.

It's very common for GoPro users to shoot videos while doing something that actually puts the GoPro in danger.

Typically, GoPro users use the cameras to document their extreme sports exploits, though they're also used in more straight-ahead activities. Funnily enough, I'm seeing a lot of tourists around New York City attaching GoPros to short poles to take selfies.

Here are some videos from GoPro's YouTube Channel to show some extreme use cases:


Smartphones don't work for things like this. They have a very high replacement cost relative to a GoPro, they can't handle the same kind of abuse, and they don't have GoPro's ecosystem of mounts and other accessories.

Additionally, if you break or lose a smartphone, you lose all your data communications capabilities.

Furthermore, GoPros have a solid footing in commercial video productions because they're the industry standard in specialized compact action cameras.

Here are some of the highlights from the filing:

  • Revenues were up 87% to $986 million in 2013. I was surprised the company was so big.
  • In Q1 2014, revenues were $236 million, down 7.5% YoY. Q1 2013 was artificially strong due to a product push-out from Q4 2012.
  • Gross margins have been falling over time: 52% in 2011, 43% in 2012, and 37% in 2013. This is because of additional costs in adding new functionality.
  • Gross margin bounced back to 41% in Q1 2014 due to higher selling prices and lower product costs for HERO3+ cameras.
  • The company generated adjusted EBITDA of $134 million in 2013 so it is solidly profitable. "Straight" EBTIDA was $109 million.
  • There will be two classes of stock, which keeps the voting power in the hands of insiders.
Even without initial pricing on the deal, I'm excited about GoPro.

There is almost no growth in consumer electronics. Camera sales are contracting, but GoPro has carved out an interesting niche, and it's really turned itself into a great lifestyle brand with an enormous online video presence. I think there's also a chance the company eventually becomes an acquisition target for a larger, growth-starved camera maker.

I'd certainly much rather see Apple buy GoPro than Beats, and it's possible that companies like Sony (NYSE:SNE) or Canon (NYSE:CAJ) could get interested, though that's more of a long-term consideration.

For me, the main issue is the size of the addressable market, but for the next few years, GoPro should have a steady pipeline of incremental product enhancements (image quality, slo-mo, 4K, etc.) that should aid revenue growth.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos