Investors pushed shares of GoPro (NASDAQ:GPRO) down nearly 14% over the past month, following the sudden departure of the company's chief operating officer and weak guidance for GoPro's current quarter. Nevertheless, the stock got an 8% boost today on a day in which 76 million shares hit the market because of the expiration of GoPro's lock-up period. This was a surprising move because lock-up expirations often cause the stock price to fall as fresh shares flood the market.
With shares now trading around $49 apiece -- still toward the low end of the stock's 52-week range -- let's take a closer look at whether this creates a buying opportunity for long-term investors.
Valuation vs. growth potential
GoPro stock is now trading at a 54% discount to its high of $98.47. However, that doesn't mean its shares are particularly cheap today. In fact, GoPro still looks pricey, with a price-to-earnings-growth rate, or PEG, of 2.26, which is above the industry average. Typically, a PEG ratio below one indicates that said company is undervalued, whereas a company with a PEG value greater than one is overvalued.
Nevertheless, valuation alone can be deceiving because many of the best growth stocks are hidden in plain sight behind frothy stock prices and largely unproven business models. Therefore, it helps to dig deeper into the underlying fundamentals of a company before dismissing it as overpriced. Using this approach, there are a few catalysts that could push GoPro's stock higher from here.
Carving out fresh opportunities
GoPro is evolving from a hardware business that makes mountable cameras into a full-blown media company. The company, for example, is uniquely positioned to unlock new revenue streams by monetizing the massive amounts of consumer-generated content on its GoPro Network. GoPro's chief financial officer, Jack Lazar, told JPMorgan last year that it would begin monetizing this media by licensing the content users upload to its site.
Strategic partnerships with the National Hockey League and ESPN are also catalysts for the stock going forward. GoPro kicked off 2015 by inking its first major deal with a professional sports league. By teaming up with the NHL, GoPro cameras worn by players and officials will capture immersive footage from both practices as well as games.
Not only is GoPro asserting itself as the standard for compelling video footage in professional sports, but it also gets to keep the rights to the footage. This is smart because it further bolsters GoPro's content strategy and plays into the brand's emerging role as a media company. GoPro has also joined forces with Vislink, a broadcast technology business, to enable its HERO4 cameras to wirelessly broadcast live high-definition video content. Therefore, between professional sports and broadcast television, there are plenty of growth opportunities ahead for GoPro.
And don't overlook GoPro's stellar holiday sales. While the company is still in the early stages of monetizing its content, GoPro is generating plenty of buzz around its products. In fact, GoPro cameras were one of the best-selling items during the recent all-important holiday season. The company shipped 2.4 million cameras during the last three months of fiscal 2014 alone -- that translates into 1,000 cameras sold every hour for the entire fourth quarter.
For these reasons, GoPro looks like a promising growth stock for risk-tolerant investors that can afford to own the stock for a couple of years. This will give GoPro time to really establish itself as a media company, while also continuing to innovate on the product level.
Ultimately, I think the long-term growth potential outweighs the still-pricey valuation of the stock today.
Tamara Rutter owns shares of GoPro, though she doesn't yet own one of its mountable cameras. The Motley Fool recommends GoPro. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.