Is The Latest Hot IPO Worth Investing In?

| June 30, 2014 | 0 Comments

It’s been awhile since we’ve had a buzz-worthy IPO to discuss.  Lately, IPO hype has been pretty sparse.  After a big year for initial public offerings in 2013, the somewhat less bullish environment this year seems to have discouraged big name IPOs from moving forward.

However, IPOs may be back en vogue after GoPro’s (GPRO) big launch. 

In fact, the GoPro IPO reminds me a lot of the big IPOs from past years.  It has a little bit of everything.  There’s been plenty of hype heading into the first day of trading.  The IPO itself was oversubscribed.  The shares have gone straight up since the launch.  And now, there’s all the talk of the valuation being too high.

It’s just like old times!

So with all that being said, is GoPro worth investing in?

First off, in case you aren’t familiar with the company, GPRO makes wearable cameras which are especially good for videoing sporting/outdoorsy exploits.  For instance, the cameras are very popular among young people who surf, snowboard, sky dive, bungee jump, etc.

The cameras are affordable and durable and have been selling like hotcakes for the past few years.  The company sold 3.8 million cameras in 2013 alone (generating almost a billion dollars in sales).

What’s more, investors seem to love the company.  The stock opened at $24 and has already been as high as $40 per share.  GPRO is currently being valued at right around $3 billion or roughly 35x projected earnings for 2015. 

That’s a fairly rich valuation for a hardware company – and it’s already got many analysts concerned about the longevity of its electronic gadget-only business.  Sales growth sustainability is why tech hardware companies rarely go public anymore.  (The last one to do so was Skullcandy (SKUL) in 2011.)

The obvious question then is, what makes GoPro any different?

Besides the impressive growth in GPRO’s camera sales, what really attracts investors is the company’s social media presence.  You see, users don’t just shoot extreme videos, they also post them online.

According to the company, in the first quarter of 2014, people viewed over 50 million hours of GoPro videos!  The videos are posted on place like YouTube, Facebook (FB), and Twitter (TWTR).  And the company has yet to monetize any of its immense media presence.

GPRO has already made a deal with Microsoft (MSFT) to launch a GoPro Channel on Xbox Live. And, it will begin earning revenue from advertising on YouTube channels this year.

If the media/advertising markets can provide GPRO with a steady, alternate source of revenue, this company may just be worth the hype.  

Let’s see what happens when the options are listed for trading in the next couple weeks.  Often times, you can see what the smart money thinks of the company by watching the options action.

Yours in Profit,

Gordon Lewis

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Category: Options Trading, Stocks

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

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