Should Fools buy into GoPro when the stock debuts on the public markets this coming week? Guest host Alison Southwick put these questions to Fool analysts Nathan Alderman and Tim Beyers in this week's episode of 1-Up On Wall Street, The Motley Fool's web show in which we talk about the big-money names behind your favorite movies, toys, video games, comics, and more.
Tim says that while most signs point to a blockbuster opening, the business may not be faring as well some investors might like. Gross margins are falling and revenue growth is slowing as key supplier Ambarella (NASDAQ:AMBA) is actively diversifying its business.
"While we will continue to expand our end market exposure, such as to non-sports wearable cameras, we anticipate that sales to a limited number of end markets will continue to account for a significant percentage of our total revenue for the foreseeable future," Ambarella said in its most recent quarterly filing with the Securities and Exchange Commission (SEC).
Nathan agrees, noting that it's rarely smart to buy a new issue in a hot IPO market. GoPro also faces just as many threats as opportunities. Still, there are two indicators that the stock may be worth buying for the long-term. First, CEO and founder Nick Woodman has arranged for 1.5% of the company's stock to be sold directly to fans via the social IPO platform LOYAL3. Engaged owners who genuinely care about their customers tend to perform better for shareholders over the long haul.
Just as importantly, Woodman and his team appear to be investing proceeds back into the business in order to prepare for new competition and diversify GoPro's revenue stream. That's also a good sign, Nathan says, even if we can't be sure that the company's efforts will pay off.
Now it's your turn to weigh in using the comments box below. Do you plan to invest in the GoPro IPO? Click the video to watch Alison put Nathan and Tim on the spot, and then be sure to follow us on Twitter for more segments and regular geek news updates!