GoPro Going Public: Will You Invest?
What is GoPro?
GoPro produces mountable and wearable cameras and accessories, which it refers to as capture devices. The company was founded in 2004 by Nick Woodman. It shipped its first product, a wrist-mounted, waterproof, film-based capture device that year.
In 2006, GoPro shipped its first digital capture device, the Digital HERO. The company introduced its first HD capture device in 2009, the HD HERO, and it introduced its current HERO3+ product line in late 2013. There are rumors of a HERO4 coming out this summer.
The company sells its products through retailers and directly to consumers through GoPro.com. Its direct sales channel accounted for 47% of its revenue in the first quarter of 2014. The company’s latest line of cameras, the HERO3+, sell for $ 300-$ 400 on their website. Approximately 53% of its revenue came from outside of the United States in 2013.
The company expects to use the IPO proceeds for “general corporate purposes, including working capital, and to fully repay our term loan under our credit facility, which had an outstanding balance of $ 111.0 million as of March 31, 2014. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, technologies or assets.” Its proposed NASDAQ ticker symbol is “GPRO”.
GoPro by the Numbers
I dug into GoPro’s financials through its S-1 filing. The company generated just under $ 1 billion in revenue last year.
First quarter 2014 revenue was actually down 8% year-over-year to $ 235.7 million. But this was due in large part to a production delay in the fourth quarter of 2012, which pushed shipments and sales into the first quarter of 2013.
Over the trailing twelve months ended March 31, 2014, total revenue was up 39% from the trailing twelve months ended March 31, 2013…
while the number of units shipped increased by 32% over the same period.
GoPro is also profitable. The company generated $ 48.6 million in profits over the last 12 months.
And earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $ 108.6 million over the same period.
GoPro is also cash flow positive.
We’ll have to wait and see where the IPO prices, but GoPro was valued around $ 2.25 billion back in late 2012 after Foxconn purchased an 8.88% percent stake for $ 200 million. This figure would value GoPro at approximately 46x trailing 12-month earnings, 2.3x sales, 21x EBITDA and 22x 2013 operating cash flow.
It’s safe to assume that GoPro will be valued at much more than $ 2.25 billion when it goes public. But how much do you think it’s really worth?
Sustainable Business Model?
GoPro is a profitable and growing entity that makes amazing cameras. But let’s face it, consumer electronics are notoriously fleeting. The company does spend a good amount on research and development (R&D costs accounted for a little over 12% of revenue in the first quarter of 2014). But that doesn’t mean competitors like Sony, Canon, Samsung, Nikon, Google, Apple, etc. won’t introduce similar – and cheaper – products themselves.
I have trouble seeing where GoPro will be 5-10 years down the road. It could possibly continue to sell better and better cameras to more and more people around the globe while fending off its competitors. Or it could end up being just another fad that winds up in the crowded consumer electronics graveyard.
Unless the price is very attractive here, I don’t think I’ll be investing in GoPro anytime soon.
So are you thinking of investing in GoPro? Are you concerned at all about the sustainability of its business model?
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