Reality? What Reality?

Yes I know, I keep coming back to the same topics a bit too much. I just made a post about yet another debt issue in China, and now I am about to give you an update on GoPro. Certainly looking at what is happening in the market today I think it is safe to say that my ramblings are not getting a lot of attention. More like, nobody is reading this stuff, but at least when the market tanks again I can prove that I said it first…

So, what about GoPro? Well since the IPO the stock price has been doing very well indeed. There was a bit of a slump off its initial peak, and the price was hovering in the low $30’s. Today the price has gone over $66!! Going back to my comparison in the earlier entry, that gives GoPro a market capitalization of $8 billion. Nikon is around $6 billion today, perhaps a bit less since the stock price has dropped in the last few months. I don’t know about you, but I certainly can’t see how that is justified.

Let’s look at some more figures about GoPro just to try and dig a deeper hole. Last quarter earnings were $11.7 million, with a loss of $20 million. The revenue for the last quarter was $244 million. The situation gets worst then when compared to last year, when the company experienced a y/y growth of 87% resulting in an annual revenue of $985 million. So the huge growth last year, which obviously served as a catalyst in driving up the stock price, is all gone! Already!! Sure, they are still selling a lot of cameras, but not really more than last year, which would give you an indication the market is becoming saturated. To close this paragraph of figures; forward PE is more than 40x next year's expected earnings!!

What investors seem to be looking at is the rapid increase of GoPro filmed media on YouTube. The numbers here are important, but these investors are forgetting that GoPro is a hardware company, not a media company. All those home-videos being uploaded do not belong to GoPro, and they do not make cent from them. You could imagine that this increase would have an impact on camera sales, but we have already seen the situation with regards to the hardware sales. I just don’t see how investors are expecting GoPro to make money from videos that private individuals are making.