GoPro is undervalued, stock review

2021年2月11日

Hey all, this is my first idea published, hope you'll get value from it and I'm happy to get feedback.

GoPro fell a lot after the Earnings Report published on February 4th. While many sites reported some bad news comparing 2019 to 2020 overall, there are some hidden gems that could be found if we dig deeper.

• Q4 2020 Revenues from GoPro.com (the company's site) was 116M (new record), 91% higher than last year. Total Q4 Revenues are 357.77M.
• Q4 2020 Gross margin was 38.3%, which reflects the continued demand for GoPro products.
  
• Q4 2020 Net Income was 44.41M. Comfortably profitable again since Q4 2019.
  
• Improved cash flow at the end of 2020 puts GoPro at 325.65M, 116% Growth Year over Year. Long Term Debts are only 218.2M (Good)
  
• Total Current Assets are 556.68M compared to Total Current Liabilities of 262.69M (Good)
  
• 3.6M Camera units sold in 2020.
  

The current Balance Sheet Ratio is above two (2.12), meaning they have enough in the value of total existing assets to fulfill their financial obligations for at least the next 12 months. That's incredible.

With total revenue of 891.93M in 2020 and a current market cap of 1.24B, stating that GoPro is currently undervalued will be an understatement. There's a huge opportunity here.

With its current market cap, cash flow, and company's projections to...

• Grow Q1 2021 revenues by 55% over Q1 2020.
  
• Grow revenues coming from GoPro.com to be 38%-42% of overall sales.
  
• Reach 1M subscribers by Q2 2021 and 2M by the end of 2021 (2M subscribers is a significant mark to reach, but it would represent $100 million of annual recurring revenue).
  
• Be profitable in 2021 with 470M to 500M cash.
  
• Even if the stock will continue to be volatile until the following earnings report and for the rest of the year, it is still in my belief. Based on other analysts' reports too, that GoPro's fair market price should be around $20 today. It's more than 100% growth.
  

So if projections of revenues for Q1 2021 will be achieved, the stock's value should probably even exceed $20, and by the end of the year, we might even see it reaching $30 or more.

Will be happy to hear what you think and discuss!

2021年2月12日

注释

My blog article about the full stock review was deleted so I just wanted to point out with answers to some of the comments below for better context:

Technical Analysis:
Honestly, I actually didn't have in mind to make a full technical analysis as I just wanted to share my research about the company as a long term investment opportunity. According to some comments, the graph has bearish patterns. Might be. This was also not financial advice to enter a position right away but rather to talk about an idea and maybe to place GoPro on your watchlist as a company with a potentially great future ahead.

A company that was once focused on no cheap physical products that were able to become profitable while an on-going global pandemic and no sports events or traveling in 2020. That means something about a lot of lessons learned and great management decisions.

The evolvement of the product:
What GoPro did with 2020's camera model, the new GoPro Hero 9, is honestly brilliant. For the first time, they presented the ability to switch lenses, and the camera is built in a way that it can quickly mount, as they call it, 'Mods'. That means lighting, an extra monitor, a microphone, and a tripod.

GoPro creates a state of the art cameras. The cameras are not cheap and not easily breakable. The average consumer will ask himself twice if they should upgrade to the latest model.

With that fact in mind, even if a GoPro consumer is not buying a new camera, they can easily consider buying a new lens or other Mods. That's on top of the monthly subscription model for the cloud service.

The new sales opportunities introduced by the new line of cameras combined with the digital subscription make GoPro's future revenue stream much more robust than in past years.

"GoPro is a hardware company with big debt":
GoPro develops high-action, high-impact cameras. A bit over a year ago, GoPro started to focus on cloud tech with a subscription-based business model heavily.

In Q4's Earnings Report, GoPro announced how they grew to 761,000 subscribers at the end of 2020, a 145% increase compared to the end of 2019. Impressive growth here as well. as mentioned above, they marked a goal to reach 2M subs by end of 2021.

For a company that was primarily relying on yearly physical product sales, shifting the focus to a monthly subscription fee for digital experiences will now be one of the leading revenue streams, if not the main one.

You might say that to join the GoPro community, you need to buy a GoPro camera. As stated above, GoPro is a tech company. They do not just make excellent cameras. They create software too. Their video editing app "Quik" has around 9M monthly active users. And they improved the main GoPro app with a new feature called "Mural", which helps GoPro camera users share their own stories and exciting moments with the rest of the community more easily.

In 2021 though, GoPro will introduce new features and support in their apps to non-GoPro users. That means that other action cameras or your mobile smartphone camera will be able to utilize these features. That increases the Total Addressable Market (TAM) of GoPro, which can potentially result in more sales and new subscribers.