Submitted a CAPS pitch for GoPro today: http://caps.fool.com/Pitch/GPRO/7271742/going-against-the-gr...
Going against the grain here. I think people are underestimating GoPro's brand power, vision, and overall social following. This is, in my opinion, the strongest brand we've seen in consumer electronics since Apple. A few reasons I am optimistic:
** Nick Woodman, founder and CEO who owns 42.5% (even after selling a portion of his stake at the IPO and secondary following) of the company. It isn't often you have a successful, invested, visionary, and downright passionate leader like Woodman. Not someone I would ever feel comfortable betting against. Also, one of his entrepreneurial principles is "evolve or die" -- GoPro will look much different in 3-5 years as a company.
** More than a camera. GoPro's cameras, software, and media components represent an entire ecosystem. The company's massive and growing social following is, and will continue to be (in my opinion), the envy of struggling electronics businesses like Polaroid, Sony, and Garmin. What GoPro has will be VERY difficult for anyone else to replicate, just as it has essentially proven impossible for companies to meaningfully penetrate Apple's brand power.
** Strong financials. After the recent secondary offering, GoPro has close to $350 million in cash with no debt. The company is producing positive free cash flow as well. Very strong financial position for a company growing as fast as GoPro.
** Record camera sales. The 3Q 2014 represented the first quarter -- outside of the fourth quarter -- that GoPro sold more than one million cameras. The new HERO4 cameras and entry-level HERO should make this holiday season -- and early 2015 -- a great couple quarters for GoPro. This is coming without much focus on international expansion, which represents a huge opportunity for the company.
** The media strategy is for real. People are quick to write off the media strategy, but GoPro is quickly hiring some impressive names to take the media component of the business to the next level. Tony Bates -- who comes from Microsoft/Skype, LoveFilm, and YouTube -- joined GoPro as president this year to head up the media segment. Zander Lurie -- who comes from CNET and CBS -- just joined as a SVP. The media strategy is still developing, but the cash coming in from camera sales gives the company plenty of time to continue developing the media segment.
These are just a few of the reasons I think people are underestimating GoPro. Nick Woodman, from what I can tell, is the rare combination of a young (39 years old), invested, passionate, and visionary leader. GoPro is changing how the world communicates by helping people capture and share their passions. GoPro is a social brand, not just a camera company.
I'm sure the stock will be volatile in the short term, but I also don't think the stock is as massively overvalued as people think. The company has more than $1 billion in sales and is growing the top line at a 40%+ clip (generating positive and increasing free cash flow in the process). This ride will likely have some bumps -- what fun would it be if it didn't? -- but I believe GoPro will be a $20 billion+ company in five years.
Outperform. Let's check back in 2019 and see how I did with this call.
This will be interesting!
David K [more]