Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of GoPro (GPRO -1.12%) were up roughly 8% in early trading on Monday after analyst Shebly Seyrafi of FBN Securities initiated coverage of the camera-maker with an Outperform rating and a $70 price target.
So what: Seyrafi's price target implies upside of roughly 10% above today's pop, but that pop has now pushed GoPro's shares more than 100% higher than their closing price from their recent IPO. Seyrafi's projections hinge on GoPro's market-leading technology, its expansion into content-management solutions through GoPro Studio and App and the GoPro Network, its strong brand recognition, and its long international growth runway -- overseas sales make up less than half the company's revenue at present.
Now what: Investors who've jumped into GoPro since its IPO have been rewarded thus far, but it's also worth considering just how heady its valuations are at the moment. Here's a quick breakdown of GoPro's major valuation metrics as compared to those of the S&P 500.
|
Metric |
GoPro |
S&P 500 |
|---|---|---|
|
Price to Sales |
7.2 |
1.8 |
|
Price to Book Value |
107.2 |
2.8 |
|
P/E Ratio |
N/A |
19.9 |
|
Price to Free Cash Flow |
88.8 |
17.2 |
Sources: Yahoo! Finance, Morningstar, Multipl, and Heartland Funds.
Fool analyst David Kretzmann recently argued that GoPro's sky-high valuations shouldn't be cause for concern, and it's certainly true that GoPro's growth rates have been very impressive in recent years. However, savvy investors know that no piece of hardware can dominate its niche forever, so at these levels, one must consider the true size of GoPro's addressable market, and whether the company can justify (or exceed) today's sky-high expectations in the coming years before major hardware players try to grab some of the action-camera market for themselves.
