For GoPro, 2 Facts That Favor a Blockbuster IPO

But what's good for venture capitalists and private equity investors may not be good for your portfolio.

Jun 17, 2014 at 6:34PM


Industry trends favor a GoPro IPO. Credit: GoPro.

Wearable-camera maker GoPro is seeking to raise $400 million at a $3 billion valuation in next week's expected public offering. Here's why I think the company will get at least that, and possibly much more.

Fact No. 1: The IPO market is (ouch!) hot
According to Renaissance Capital, which tracks the IPO market, there have been 124 IPOs priced in 2014, up 57% over last year at this time. All told, 181 companies have filed to go public (up 74%) with completed offerings accounting for $25.8 billion in proceeds (up 40.9%). See the pattern? The IPO market is hot again, even if the Renaissance IPO ETF (NYSEMKT:IPO) is up just 2.7% year to date versus up 5% for the S&P 500.

Fact No. 2: The right industry at the right time
What's more, GoPro is in privileged company. Three of this year's top IPO returners are tech companies, with Zendesk (NYSE:ZEN) leading the way with a near double from its $9 offering price. The company uses a cloud-based platform for helping clients better handle customer service requests. Revenue zoomed 89% last year.

Recent Ipo Returns Renaissance Capital

Among newer issues, tech names are doing best right now. Credit: IPO investment firm Renaissance Capital (

Strap on strong growth... but prepare for a bumpy ride
Interestingly, GoPro grew about as fast as Zendesk last year. The bad news? Unlike IPO winners (NYSE:COUP) and Arista Networks, both of which enjoyed sharply accelerating revenue growth in 2013, GoPro's sales growth is decelerating, and gross margins falling.

And not by a little. Revenue growth fell to 87% last year from 125% in 2012, and 263% the year before that. Gross margin declined to 38.2% from 43.2% and 52.3%, respectively, during the same period. Heavy investments in the GoPro product line appear to be taking a toll on profits, which fell more than 50% in the most recent quarter.

So, even if all signs point to big gains on GoPro's IPO day next week -- and maybe even the 30 to 60 days following -- there's good reason to hold off on buying the stock until after venture capitalists have cashed out, and the novelty has worn off.

How to make patience pay
IPO stocks such as GoPro are intensely alluring, and for good reason. Stories of those who bought early and held on are now the stuff of stock market legend. And yet, the smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's why I'm recommending a report on a group of high-yielding stocks from our top analysts. In it., you'll find everything you need to know about investing in the market's most reliable payers. Ready to learn more about these stocks? Just click here now for your free report.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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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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