GoPro stock, GoPro IPO

GoPro's Hero3+ Cameras, Credit: GoPro,

It's official: As of this morning, GoPro Inc (NASDAQ:GPRO) is a publicly traded company, and the market couldn't be much more excited. Shares of the rugged camera maker are currently up around 31% from its IPO price of $24 per share, which already represented the high end of GoPro's expected range.

Part of that price has to do with the fact GoPro reclassified itself as a "media company" prior to the IPO, thereby allowing it to command a higher valuation -- something which understandably didn't sit well with fellow Fool Jamal Carnette today.

1. GoPro isn't really a media company right now
And that brings me to the first threat to GoPro's long-term success: Namely, that it still derives substantially all its revenue from the sale of hardware capture devices.

To its credit, the company does have GoPro Studio and the GoPro App, both of which help facilitate distribution of the resulting photos and videos to popular sites like YouTube, Facebook, Instagram, and Vimeo. And yes, that does drive difficult-to-measure brand awareness for GoPro. But at this point, GoPro simply hasn't figured out how to directly monetize that media.

That's not to say it doesn't intend to do so. According to GoPro's S-1 filing, the company states plans "to pursue new revenue opportunities from the distribution of engaging GoPro content in the near term." However, the only examples it provides are advertising with YouTube and Virgin America, as well as a new agreement to develop and launch a GoPro Channel on Xbox Live. And while GoPro does expect those agreements to start generating revenue sometime in the second quarter, it admits that revenue likely won't be material in 2014.

Still, while they may not pay the bills, you've got to admit those videos sure are amazing:

2. Where's the growth/moat?
Of course, lacking a way to monetize its media won't be a problem if GoPro's hardware business continues rolling full steam ahead, right?

GoPro has the brand presence as the go-to player in its space, and last year commanded an incredible 45% share in the U.S. camcorder market. And that resulted in staggering growth over the past few years, as GoPro went from shipping 1,145 million individual camera units in 2011 to 3,849 million in 2013. Annual revenue more than quadrupled over the same period, rising from $234.2 million to $985.7 million.  

But what happens if a bigger player like Apple or Samsung steps in with an equally rugged, less expensive device of their own? GoPro might still have its name, but it's hard to imagine it being capable of competing on a global scale with these well-funded tech behemoths.

In fact, even in the absence of such competition, GoPro might have already hit a growth plateau. If you look at the S1 section on the discussion of GoPro's financial condition and results of operations, you'll see management succinctly states "We do not expect to sustain or increase our revenue growth rates."

Sure enough, GoPro only shipped 852 thousand units in Q1 of this year, down from 954 thousand units in the first quarter of 2013. As a result, revenue decreased over the same period, from $255.1 million in Q1 of 2013, to $235.7 million in its most recent quarter. Meanwhile, adjusted first-quarter EBITDA fell over the same period from $40.9 million last year, to roughly $28.6 million in Q1 of 2014.

Foolish takeaway
GoPro is still an intriguing business dominating its niche, so I'll be sure to touch base along the way to see how its plans are progressing. For now, however, and as a long-term investor, these two risks alone are more than enough to keep me on the sidelines.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.