The Nasdaq is About to Get Extreme, But Not in The Way You Think

Action sports camera company GoPro has announced plans for an IPO on the Nasdaq.

May 20, 2014 at 1:00PM
Take The Long View

The Dow Jones Industrial Average (DJINDICES:^DJI) was down 108 points in early afternoon trading, continuing the index's retreat from repeated all-time highs reached in recent sessions. The tech-heavy Nasdaq (NASDAQINDEX:^IXIC) was also down 24 points.

It was a relatively slow news day on the markets, without any major new data releases, earnings reports, or megamerger announcements.

But that didn't stop GoPro, the maker of small, wide-angle video cameras, from bringing a dose of its action-sports style to Wall Street late Monday. The company announced plans for a $100 million IPO on the Nasdaq, filing its S-1 form with the SEC

What is GoPro?
GoPro manufactures small, individual video cameras fitted with a wide-angle lens and accompanied by a waterproof casing. The combination gives individuals, athletes, adventurers, and explorers the opportunity to capture amazing footage from some pretty extreme locations.

Go Pro Drone Flickr Don Mccullough

Yes, you can attach your GoPro to a drone. Source: Don McCullough.

Users can attach the GoPro camera to scuba gear, motorcycle helmets, skydiving goggles, and a near-infinite host of other items. You can even strap your GoPro to a drone and take aerial footage wherever you are.

If this is your first time hearing about this camera, it's worth your time to peruse some of the top GoPro videos on YouTube.

The product is pretty cool, but how good of an investment could this be?
GoPro reported $986 million in revenue in 2013 that yielded $61 million in profit. Both figures nearly doubled the company's 2012 revenue of $526 million and $31 million profit. 

That growth may be fleeting, however, as this year's first-quarter results saw revenue decline 8% year over year. The company attributed the decline to a timing anomaly that caused a spike in the delivery of its Hero3 model last year. 

The company said it intends to raise $100 million in the initial public offering, but that number is likely just a placeholder. Filings state that the funds will be used for general corporate purposes, as well as to pay down an existing term loan.

At the end of the day, GoPro's financials look strong. The company has achieved a remarkable level of success selling a niche camera to the mass market. But one big question remains: where will its future growth come from?

Finding growth
With nearly $1 billion in revenue just last year, the market may soon reach its saturation point for such a niche product.

Most people already have a perfectly good video recorder on their smartphone, so why should investors expect the GoPro to find its way into even more homes? With a price point of just a few hundred dollars, $1 billion in sales in a year is a truly remarkable number of cameras already in use around the world. 

Go Pro Surver Gordon Tarpley

Source: Gordon Tarpley

Should we, or the company, really expect that many more individuals to buy the camera, along with a handful of accessories, and then strap it on to document Christmas morning or the family ski trip?

That's a hard sell.

Based on the company's regulatory filing, management agrees. In fact, it sees the future of GoPro as less of a camera manufacturer and more as "an exciting new media company."

Management stated in the S-1: "As of December 31, 2013, we had not derived revenue from the distribution of, or social engagement with, our content on the GoPro Network. ... However, we plan to pursue new revenue opportunities from the distribution of engaging GoPro content in the near term."

That means expanding the company's already huge list of sponsored athletes. It means consistently creating engaging content featuring those athletes and others who can appeal to the masses. And it means finding partners who will pay to have access to GoPro-created content.

Who knows what the future holds, and it's worth noting that GoPro has outperformed all of its critics since shipping the company's first camera back in 2004. That said, the risk and reward equation doesn't add up for me, at least not yet. 

The product is without question very cool, and it has found a nice corner of the market where it has done quite well. If this were five or eight years ago, the growth potential would be obvious. But today, the plan for growth is not obvious. It's down right murky. 

I'm a big fan of the GoPro the camera, I'm just not convinced on GoPro the stock. But in either case, the story will be fun to watch.

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Jay Jenkins has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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