GoPro Stock Analysis


GoPro Stock Analysis

Catalysts:

  • Changing business model to DTC with GoPro.com, hence eliminating the middleman, and improving margins


GoPro Stock Analysis

  • Subscriber count to GoPro.com increasing rapidly

  • Average Selling Price (ASP) increasing rapidly

  • Possibility of returning cash to shareholders next year


GoPro Stock Analysis


Risks:

  • Rely on only one product and mobile phone cameras are more suitable for most people

  • Large increase in subscriber count for GoPro.com comes mostly from automatic one-year free subscription from purchase of camera → No certainty of renewal

  • 70% of votings rights in the hands of CEO, Chairman, and founder of the company

  • Declining reveenues in recent years


Financial Analysis:


GoPro Stock Analysis

  • Massive increase in net income this year (and this quarter) was from a one-time tax benefit


Valuations:

  • My personal Biases:

  • Looks undervalued but skeptical of ability to shift business and grow revenues

  • Whole investment will depend on that business shift

  • Assumptions:

  • GoPro.com Revenues will grow annually by 15% in the next 5 years while the retail revenues falling by 5% per year

  • Gross profit margin gradually increasing to 43%

  • Pretax expenses 35% of revenues

  • Net income 75% of operating income

  • FCF 80% of net income

GoPro Stock Analysis

  • Discount rate of 13% for FCF

  • Terminal growth rate of 2%

  • Margin of safety of 20%


GoPro Stock Analysis

  • Exit Multiples based on P/FCF Ratio

  • Sales 20% higher in bull case and 20% lower in bear case

  • Shares outstanding stays the same


GoPro Stock Analysis

Conclusion

  • Looks overvalued

  • Only scenario where it is a good investment is in the case whereby the business shift is a success

  • Too speculative for me


GoPro Stock Analysis














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