blainehodder Posted November 24, 2015 Share Posted November 24, 2015 100% returns on tangible capital. 12% EBIT/EV. No debt. Expanding gross profits. 40% revenue growth. Falling knife stock. Magic Formula special. No real way of telling if there is a moat long term (I suspect clones will eat at them), but this is a fun brand with some cool products (HERO4, upcoming drone quadcopters). Big international growth should throw off enough cash to push up the stock. Anyone else thinking it looks attractive here? This is a really cheap valuation for a high margin, US growth stock in my opinion. Interesting social media campaign. Couldn't be a more "outsider" CEO! At the very least it is a fun company to look at. What do you think? I'm not long, but contemplating a position. Not really sure how much there is to know here. It is cheap. It is growing. It is cool. It is risky. Link to comment Share on other sites More sharing options...
intothebreach Posted November 24, 2015 Share Posted November 24, 2015 Haven't looked into the stock yet but you have the ticker wrong, it's GPRO. From casual observations, they do seem to have a very loyal and active user base (both it the sense of being active and actively using Go Pro products). Link to comment Share on other sites More sharing options...
blainehodder Posted November 24, 2015 Author Share Posted November 24, 2015 Haven't looked into the stock yet but you have the ticker wrong, it's GPRO. From casual observations, they do seem to have a very loyal and active user base (both it the sense of being active and actively using Go Pro products). Corrected. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted November 25, 2015 Share Posted November 25, 2015 I like ZeroHedges description: "Camera On A Stick." This company fits the definition of a fad: one product, rapidly changing industry, extremely unpredictable future based on rapid changes in technology and competition. In fact, I'd say competition and obsolescence actually IS predictable! I wouldn't touch this one with a 10-foot selfie-pole. Link to comment Share on other sites More sharing options...
blainehodder Posted November 25, 2015 Author Share Posted November 25, 2015 I like ZeroHedges description: "Camera On A Stick." This company fits the definition of a fad: one product, rapidly changing industry, extremely unpredictable future based on rapid changes in technology and competition. In fact, I'd say competition and obsolescence actually IS predictable! I wouldn't touch this one with a 10-foot selfie-pole. To some extent I agree. However, with 40% revenue growth and expanding and fat gross margins, it doesn't necessarily need to exist in perpetuity to be a profitable purchase. It looks like the market expects this to last less than 5-7 yrs guven the valuation. Is that really the case? Assume 30-40% growth for 2-3 yrs on international uptake and then a fairly rapid decline, and it can still make sense if the CEO divs the cash. North America is still not even close to saturated with cam on a stick yet. If they get 1 more hit product like quadcopters there is almost certainly big upside. Obviously it is risky, but I may buy a small position. I can also imagine FB taking this out. This reminds me of King Digital. Link to comment Share on other sites More sharing options...
cmlber Posted November 25, 2015 Share Posted November 25, 2015 I like ZeroHedges description: "Camera On A Stick." This company fits the definition of a fad: one product, rapidly changing industry, extremely unpredictable future based on rapid changes in technology and competition. In fact, I'd say competition and obsolescence actually IS predictable! I wouldn't touch this one with a 10-foot selfie-pole. To some extent I agree. However, with 40% revenue growth and expanding and fat gross margins, it doesn't necessarily need to exist in perpetuity to be a profitable purchase. It looks like the market expects this to last less than 5-7 yrs guven the valuation. Is that really the case? Assume 30-40% growth for 2-3 yrs on international uptake and then a fairly rapid decline, and it can still make sense if the CEO divs the cash. North America is still not even close to saturated with cam on a stick yet. If they get 1 more hit product like quadcopters there is almost certainly big upside. Obviously it is risky, but I may buy a small position. I can also imagine FB taking this out. This reminds me of King Digital. Why would FB take them out? It would probably cost them a few million dollars to make an identical product. 5-7 years is a long time for a fad. Margins will compress rapidly when people realize they can get an identical product for half price as long as they are OK with it not saying GoPro on it. Link to comment Share on other sites More sharing options...
beerbaron Posted November 25, 2015 Share Posted November 25, 2015 I like ZeroHedges description: "Camera On A Stick." This company fits the definition of a fad: one product, rapidly changing industry, extremely unpredictable future based on rapid changes in technology and competition. In fact, I'd say competition and obsolescence actually IS predictable! I wouldn't touch this one with a 10-foot selfie-pole. To some extent I agree. However, with 40% revenue growth and expanding and fat gross margins, it doesn't necessarily need to exist in perpetuity to be a profitable purchase. It looks like the market expects this to last less than 5-7 yrs guven the valuation. Is that really the case? Assume 30-40% growth for 2-3 yrs on international uptake and then a fairly rapid decline, and it can still make sense if the CEO divs the cash. North America is still not even close to saturated with cam on a stick yet. If they get 1 more hit product like quadcopters there is almost certainly big upside. Obviously it is risky, but I may buy a small position. I can also imagine FB taking this out. This reminds me of King Digital. I don't know why FB would be mentionned here. Not even close to their business. I'd use Soundblaster (creative) as a equivalent proxy for lifecycle. An HD camera and memory card will be worth the price of a toothbrush in 7 years. I think your views are too optimistic, once sales falls, margins falls as well... having both work against you is painfull. I remember my Blackberry purchase at 39$... I called it my stupid gamble. Sill gives me gray hairs to think abou it. BeerBaron Link to comment Share on other sites More sharing options...
johnny Posted November 25, 2015 Share Posted November 25, 2015 I like ZeroHedges description: "Camera On A Stick." This company fits the definition of a fad: one product, rapidly changing industry, extremely unpredictable future based on rapid changes in technology and competition. In fact, I'd say competition and obsolescence actually IS predictable! I wouldn't touch this one with a 10-foot selfie-pole. To some extent I agree. However, with 40% revenue growth and expanding and fat gross margins, it doesn't necessarily need to exist in perpetuity to be a profitable purchase. It looks like the market expects this to last less than 5-7 yrs guven the valuation. Is that really the case? If you're doing a NPV of future cash generated by the product, you may be right. But what is the likelihood of GPRO management rationally seeing their business decline, and deciding to just dividend out the earnings while humbly managing the company into a quiet goodnight? Versus, say, using all that cash on an acquisition binge in order to justify a New Thesis or a Next Stage of the company once revenue starts to flatten out? Link to comment Share on other sites More sharing options...
RadMan24 Posted November 25, 2015 Share Posted November 25, 2015 I like ZeroHedges description: "Camera On A Stick." This company fits the definition of a fad: one product, rapidly changing industry, extremely unpredictable future based on rapid changes in technology and competition. In fact, I'd say competition and obsolescence actually IS predictable! I wouldn't touch this one with a 10-foot selfie-pole. Hmmm that's a dim point of view. Given that a the company has free software, loyal fan base, market leading position in cameras (previously dominated by giants) by creating a new niche. Yea, I don't see any competitor coming out within the next few years eroding this company. Link to comment Share on other sites More sharing options...
RadMan24 Posted November 25, 2015 Share Posted November 25, 2015 I like ZeroHedges description: "Camera On A Stick." This company fits the definition of a fad: one product, rapidly changing industry, extremely unpredictable future based on rapid changes in technology and competition. In fact, I'd say competition and obsolescence actually IS predictable! I wouldn't touch this one with a 10-foot selfie-pole. To some extent I agree. However, with 40% revenue growth and expanding and fat gross margins, it doesn't necessarily need to exist in perpetuity to be a profitable purchase. It looks like the market expects this to last less than 5-7 yrs guven the valuation. Is that really the case? If you're doing a NPV of future cash generated by the product, you may be right. But what is the likelihood of GPRO management rationally seeing their business decline, and deciding to just dividend out the earnings while humbly managing the company into a quiet goodnight? Versus, say, using all that cash on an acquisition binge in order to justify a New Thesis or a Next Stage of the company once revenue starts to flatten out? They have authorized a stock buyback... Link to comment Share on other sites More sharing options...
innerscorecard Posted November 25, 2015 Share Posted November 25, 2015 I like ZeroHedges description: "Camera On A Stick." This company fits the definition of a fad: one product, rapidly changing industry, extremely unpredictable future based on rapid changes in technology and competition. In fact, I'd say competition and obsolescence actually IS predictable! I wouldn't touch this one with a 10-foot selfie-pole. Hmmm that's a dim point of view. Given that a the company has free software, loyal fan base, market leading position in cameras (previously dominated by giants) by creating a new niche. Yea, I don't see any competitor coming out within the next few years eroding this company. http://www.mi.com/yicamera/ Link to comment Share on other sites More sharing options...
johnny Posted November 25, 2015 Share Posted November 25, 2015 They have authorized a stock buyback... Net-nets excluded, stock buybacks at double-digit PEs aren't especially beneficial to shareholders if the core business is not growing, or at least stable. I think Sears is a great example of why buybacks shouldn't be reflexively treated as a positive event. So assuming the authorization is actually acted upon seriously, ultimately the question then comes back to whether or not they have a defensible position, and a plausible way to grow and hold onto their revenue and margins... Link to comment Share on other sites More sharing options...
Max Alpha Posted November 25, 2015 Share Posted November 25, 2015 The comment about single product risk in a rapidly changing space is perfectly fair, but I think some of the other comments are probably contradicted by a robust performance over 5+ years. I use GoPro's for snowboarding point of view footage, I'll admit I have never even looked at the stock, but a couple of opinions I would offer as a consumer: 1) GoPro has always been significantly more expensive than many comparable alternatives (yet become a clear market leader) 2) There has almost always been a product with a better feature set for the same price 3) It has been the dominant extreme sports / POV / helmet cam market option since circa 2009 4) They have an unmatched stable of athletes from most extreme sports marketing their products In the last couple of years GoPro has greatly increased its potential market. It has broadened its horizon from an extreme sports point of view camera (a very rapidly growing 'niche') which was successful because it was simple, bombproof, and had far superior brand power and marketing, to a trendy camera for the average 20-something to take to music festivals and on trips around the world. I could be wrong but I don't expect we will be seeing people bragging about their Yi Camera footage on social media running around the worlds biggest music festivals high as a kite any time soon. They have a fairly high rate of obsolescence so you have to buy a new one every 2 or 3 years. This is both a strength in the sense that their loyal customer base make repeat purchases every other product generation, but it also means if they lose the pulse of consumers they will likely fall off a cliff given a concentrated product offering. The obvious risk is that the industry becomes a commoditised hardware story, but there is a clear intangible asset in the brand based on the last half a decade. Traveling to your local ski resort, motocross track, music festival etc. will provide a good indication of this, their track record to date has been in spite of cheaper alternatives. Link to comment Share on other sites More sharing options...
Sionnach Posted November 25, 2015 Share Posted November 25, 2015 GPRO just screams "fad". I think the three key words from the original poster were: "no real moat" Investing because you think a product is cool, or describing a "niche" as a product that a certain group of people think is really cool relys heavily on the speculation that the trend will continue. Buffett would not condone this kind of wave-riding I could be wrong and GPRO may evolve into a content-based company or an Apple-type brand However, the numbers are very similar to Crocs in 2006, high ROIC, high growth. Similar story, too - good brand name, a group of loyal customers (god knows why), investors claiming a "niche". I might take a look at the crocs chart as a reminder of what "downside" could really mean Link to comment Share on other sites More sharing options...
Simple Investor Posted January 21, 2016 Share Posted January 21, 2016 Whats the deal with this. 1.5B market cap - down from over 8billion. 500mm in cash/bonds. 8-9 times earnings. Is this a zero growth company? Link to comment Share on other sites More sharing options...
LC Posted January 21, 2016 Share Posted January 21, 2016 Not a "fad" product IMHO. Amongst "extreme" athletes (i.e. surfers, skiiers, mountain bikers, adventurers, etc.) there exists a real market for the product. You can't strap an iPhone onto a surf board or ski pole to take video. The problem is this market is very niche, IMHO too small to really be a public company. Link to comment Share on other sites More sharing options...
Guest Grey512 Posted January 21, 2016 Share Posted January 21, 2016 First entrant in a no-moat industry with a crazy CEO. Not interesting until it hits $6-7. Link to comment Share on other sites More sharing options...
Simple Investor Posted January 21, 2016 Share Posted January 21, 2016 Let's hope it gets to $6. That's basically a net net then. Looks like a lot of equity issues as far as comp. Annoying for sure. Is this company dead? My instincts say no. 5% growth with a 10% discount rate and this is 30% undervalued. Not saying that is great but it is something. I'm posting on my fb to see if anyone owns one and if they will be buying again. Link to comment Share on other sites More sharing options...
Simple Investor Posted January 21, 2016 Share Posted January 21, 2016 FB already turning up a lot of hate. People not a fan so far. Link to comment Share on other sites More sharing options...
eclecticvalue Posted January 21, 2016 Share Posted January 21, 2016 There is the drone market which is on the rise. They uploaded videos on the YouTube page about autonomous drones that follow you around. Link to comment Share on other sites More sharing options...
wjsco Posted January 21, 2016 Share Posted January 21, 2016 Why does everyone think this is a fad? It's a legitimate product. CROCS are not a legitimate product, I'm sorry. You know who should be dominating the action camera space? Any of the major camera companies. Want to know why they aren't? Because iPhones replaced all the major camera companies. This essentially created a vacuum that GoPro could fill. Now, can an iPhone replace an action camera? The answer is no. It's really that simple, I don't understand where the disconnect is. Also, people don't even use the term action-camera. If it's a point-of-view camera that you can take into challenging environments, people call it a gopro. It doesn't matter if Panasonic made the camera, people call it a Gopro. Kind of like how people in the south call soda Coca-cola, or we call tissues Kleenex, etc. They have this thing called share of mind, and it's a great thing to have. The other thing is user engagement - do you know any other product where customers advertise the fact that they use the product? Every single youtube video... "GOPRO footage sick base jumping," "GOPRO footage surfing with sharks." I think that says something. People actually want to associate with this commercial item...if you step back and think about it, it's kinda crazy (at least imo) Link to comment Share on other sites More sharing options...
LC Posted January 22, 2016 Share Posted January 22, 2016 There is the drone market which is on the rise. They uploaded videos on the YouTube page about autonomous drones that follow you around. very true. they do serve slightly different purposes (1st person vs. 3rd person view) but drones will definitely take some share. GoPro needs their own drone TBH. as a skier/surfer, if i had to choose one, i would choose a drone. that said, most people in these sports have the disposable income to use both (and do). Link to comment Share on other sites More sharing options...
JayGatsby Posted January 22, 2016 Share Posted January 22, 2016 Totally anecdotal, but I feel like I see way less gopros while skiing now. People may have just decided that watching themselves ski really just isn't very interesting. Link to comment Share on other sites More sharing options...
oddballstocks Posted January 22, 2016 Share Posted January 22, 2016 Not a "fad" product IMHO. Amongst "extreme" athletes (i.e. surfers, skiiers, mountain bikers, adventurers, etc.) there exists a real market for the product. You can't strap an iPhone onto a surf board or ski pole to take video. The problem is this market is very niche, IMHO too small to really be a public company. This fall we were at a park where they race cars on the weekend. For the first time I noticed guys had GoPro's mounted either on their hood or on the roof. I'd never seen that before. More than a few hand them in the car with them. It seems this is finding its way into newer niche markets. Recently I heard of a company using these for some aspect of home inspections. It was easier to mount a GoPro on a pole compared to buying really expensive equipment. As a skier this was HUGE a few years back. I've never considered buying one, I prefer to live in the moment when I'm out there. I also wonder if I'd ever look at the footage. But I will admit to watching other people's runs on YouTube. One great use is to find hidden powder stashes in the trees by watching other people do it, it's like a virtual tour guide. Personally I like memories, they change with time and I always remember things much better than they were. For something I enjoy like skiing I consider that a benefit. A GoPro would capture errors and mistakes and I'd have to remember that, with my mind I'm freed from those issues. I just remember how great it was, not any mistakes I made. Link to comment Share on other sites More sharing options...
bookie71 Posted January 22, 2016 Share Posted January 22, 2016 Last month when a friend and I went deer hunting, the other two hunters each had a gopro and one even had it mounted on his rifle. Link to comment Share on other sites More sharing options...
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