Is GoPro Stock a Buy Now?

Bodyboarding Salt Creek GoPro HD camera. By Axion23, July 5, 2010, via Wikimedia Commons.

GoPro (GPRO -0.59%) stock has taken investors on an exciting run since going public in late June. Is GoPro stock a buy now? Five Motley Fool contributors weigh in below with varied responses to that question.

Tamara Walsh: Shares of GoPro have surged more than 180% since the camera maker's IPO in June. It's not surprising, then, to see some investors rushing to the conclusion that the stock is overpriced at where it currently trades, around $68 a pop. (Shares closed Sept. 10 at $68.47, less than three months removed from its $24/share IPO. ) However, one thing that many critics aren't taking into consideration is that GoPro is much more than a camera maker.

GoPro is morphing into a media company today by leveraging the consumer-generated content on its GoPro Network. GoPro's chief financial officer, Jack Lazar, told JPMorgan analysts recently that it would begin monetizing this media by licensing the content that users upload to its site. This new revenue stream might also include ad-based revenue from GoPro's YouTube channel, as well as a video-editing service, according to Lazar.

This creates a massive opportunity for GoPro, particularly considering just how widely shared its content is these days. In 2013, GoPro's customers shared over 2.8 years of video content on YouTube where GoPro was specifically mentioned in the title. Moreover, in the first quarter of 2014 YouTube recorded more than 6,000 uploads of GoPro content per day. Perhaps most impressive, more than 1 billion people viewed GoPro content on YouTube during that three-month period.

GoPro is also positioning itself as a software company these days with services like its GoPro Templates, which let users easily edit and share their footage via social media. Meanwhile, the company's GoPro Studio has been downloaded more than 4 million times, while the GoPro mobile app has been downloaded more than 6 million times. For these reasons, I believe GoPro is still in the early stages of its growth story and therefore a buy today, regardless the stock's nice run thus far. 

Rick Munarriz: GoPro may be in the driver's seat of the wearables boom, but let's not forget that Ambarella (AMBA 0.15%) is the one that called "shotgun" to get the better view. It's also the better buy here. Ambarella is the lone provider of the video compression chips that go into every GoPro camera, and that's a bigger deal than you might think. GoPro even had to warn investors in its prospectus earlier this year about the significant role that Ambarella plays in keeping GoPro in business. 

We do not have an alternative supplier for these key components. If Ambarella stopped supplying components on acceptable terms, or at all, or we experienced delays in receipt of components from Ambarella, we would experience a significant disruption.

Investors are better off buying Ambarella as a play on GoPro's success. You wouldn't be giving up a lot in terms of growth to buy Ambarella. Analysts see it growing its revenue 21% next year, in line with GoPro's 22% projected growth. However, while GoPro is trading at a lofty 69 times next year's earnings, Ambarella is fetching a far more reasonable earnings multiple of 22 times next year's profit target. Why take three times the valuation risk? Ambarella's chips also power Google Helpouts webcams, the popular Dropcam line of high-def Wi-Fi surveillance cameras, and other products, giving investors broader diversity in case GoPro itself has any growth hiccups along the way. If you still think that GoPro is a smart play, consider Ambarella as an even smarter investment.

Jeremy Bowman: Despite having skyrocketed since its IPO, GoPro stock is still a much more appealing buy than most other recent tech IPOs. Unlike many of the social media stocks that have hit the market, GoPro is profitable, having brought in $60.6 million in 2013. The company almost dominates its market, with essentially no rival as it claims 94% of the action camera market, and leads the broader video camera category with a 30.4% market share.

That niche dominance and leadership should help ensure continuing growth in the category as it tackles new opportunities. The company just opened a sales marketing office in Munich, setting its sights on the foreign market for the first time and also sees a valuable growth opportunity in advertising as it has only just begun trying to monetize user-generated content, a revenue stream one analyst said could be worth $1 billion today. 

Additionally, GoPro's technology could make the company an attractive acquisition target for companies like Apple, Samsung, and Google, who would love to incorporate the high-performance camera technology into their smartphones and tablets. With 42 patents and many more pending, the company has more assets than just its strong brand.

Jamal Carnette: GoPro's a stock that has divided the Foolish investing community, with one side looking at the tremendous potential and the other concerned about excessive valuations -- count me among the latter.

The company has grown a great deal in a mere three years by growing revenue from $64.5 million in 2010 to nearly $1 billion in 2013. But more recently growth has decelerated while its market capitalization has increased, leading to what I feel is an unsustainable valuation at $8 billion with trailing-12-month revenue at $1 billion. In addition, the company's oft-discussed media strategy appears to be difficult to monetize in any substantive way. The end result is a single-product consumer electronics company  -- and by trading at 8 times sales, an expensive one at that.

With that being said, I felt that same way shortly after the IPO and the stock has continued its momentous run. Could the company grow into these lofty valuations, sure, but I'd rather look for better value in this market.

Steve Symington: I just can't get on the GoPro bandwagon right now. GoPro still derives essentially all its revenue from the sale of hardware devices. And although it admittedly commands an impressive slice of that niche -- as of June it represented the top three camera/camcorder units, and six of the top 10 camera accessory units sold in the U.S. -- it's a finite market. And management succinctly stated in the company's S-1 registration filing that "We do not expect to sustain or increase our revenue growth rates."

As a result, much is riding on its widely anticipated efforts to evolve into a "media" company by monetizing its distribution and content management solutions, the categorization of which helped GoPro command a higher valuation at its IPO. If those efforts fall flat, investors will be left holding the (camera) bag when GoPro's valuation comes back to earth. In the end, given the stock's massive post-IPO run, I'm just not convinced that risk is worth taking.