- GoPro compares well to one specific company.
- However its valuation doesn't.
- The best entry point is $30.
GoPro (NASDAQ:GPRO) has something that very few new tech companies possess - a brand. Unlike many recent tech fads that rely on a specific technology or social event to gain market attention, GoPro relies on the component that every company dreams to control, which is the ability to have loyal clients.
Remember those MP3 players that came out about a decade ago? Many (especially those that didn't have one) said it was just another player, not being even the first one on the market. If I can recall, back then the first one I saw in a store was from Creative Labs, a company more known for its soundboards than for anything else. In the end, a late arriver to the MP3 market conquered the hearts and pockets of its clients (which became fans). A little company called Apple (NASDAQ:AAPL) dominated this market, where people would rather hide than be seen listening to their favorite tunes in anything else other than an iPod.
Was the MP3 market infinite back then? For sure, no.
Is the "self/POV" camera market infinite now? I believe the answer is the same.
But, can the future trajectory of both companies be compared and forecasted? Yes, even if with different nuances.
Why in the same boat?
First of all, unlike the iPod, any GoPro camera has the distinct market advantage of being seen, not only the leader of the pack, but also as the first-to-market (at least from the generality of people perspective). Any surfer, snowboarder, World Cup fan or "point-of-view" fan on the planet thinks of GoPro when the time to buy such a camera arrives. Does the competition have better cameras, or can smartphones do some of the stuff it does? From a consumer perspective, it truly doesn't matter.
Once you establish a name, once you say I need to buy a GoPro to record this year's holidays, instead of saying I need to buy a camera that can record my point of view for this year's holidays, once you associate a brand with a necessity or a function, you probably surpassed the highest hurdle in any business. Apple had (and still has) that, GoPro has it as well.
However, like every cruise boat, once you get inside it doesn't mean that everybody sleeps in the same class. By this I'm not saying that GoPro will travel next to Leonardo DiCaprio on Titanic's trip to America, but it doesn't also mean that it will have the top suit available for itself. Even if the potential market will be different, and more limited, still there is a very considerable client base to be conquered. And with the constant innovation in the hardware and software space, I believe that former GoPro clients will be the new clients of the future, due to new features made available.
What price to enter?
Most analysts project 2015 earnings to be in the realm of 95 cents per share, which translates to a P/E of 44. Apple is trading at about 16 times its earnings, but, as I said, whilst on the same boat, we are talking of different suites.
Believing the S&P will take some time to breathe sooner than later, and translating that time into a percentage of 5% to 10%, I think that a suitable entry point in GoPro would be around the $30 barrier, or even a little beneath.
From that point, a journey up until the $55/$60 range can guarantee a quite profitable investment to the most patient ones.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.