Summary: OVERPRICED
Score: 1/20
MOS: 1%
Share Price: $9
Sticker Price: $10
Is GoPro stock a good buy?
GoPro is a digital camera and technology company founded in 2002 and based out of San Mateo, CA.
They specifically manufacture action cameras and video-editing software. The founder and CEO, Nick Woodman, was motivated to create the GoPro camera when he went on a surfing trip in Australia in 2002. At that time, there wasn’t a small digital camera that could be used in action sports. The name “GoPro” came about as Woodman and his surfing friends all aspired to become professional surfers as “Going Pro” was the ultimate goal. Woodman initially raised capital by selling bead and shell belts for under $20 (USD) from his VW van. His parents later invested $230K. In 2004 the company sold its first camera, which was 35mm film. Soon after, the company switched to digital.
At its peak, the share price reached $86. Now today, the share price sits around $9. I’ve been a customer of GoPro for about 12 years. Their cameras are highly durable and the video quality is outstanding. So what happened to GoPro?
This article from Yahoo Finance states that GoPro has poor financials, especially with a low cash-to-debt ratio. They also have annual revenue growth of -11% which is worse than 79% of companies within the hardware industry.
This article from havecamerawilltravel.com eludes to a moat issue. In other words, GoPro isn’t the only action camera on the block.
Here are the competitors and their estimated retail prices on Amazon.
- GoPro HERO9 – $495
- Nikon KeyMIssion 170 – $179
- Garmin VIRB Ultra 30 – $500
- Sony DSCRX0 – $548
- Akaso EK7000 – $54.99
- DJI Osmo Action – $199
As you can see, this market is highly saturated. Manufacturing action cameras is no longer difficult. Consumers can obtain a camera that is just as good as a GoPro, for a lower price. If GoPro wants to stand apart from the competition, it will need to innovate. The action cam industry is going to be hard to capitalize on which means it should potentially look at other industries. I recommend switching to more boring “enterprise” industries. Some ideas that come to mind include:
- Residential security
- Commercial security
- Industrial surveying
- Infrastructure surveillance
If they can combine their camera technology with software platforms to serve a niche, there might be a future. On the other hand, if they don’t make a move, their share price could fall below $5 and enter into “penny stock” territory. I wrote a support article on penny stocks here. Long story short, 99.9% of stocks that fall below $5, never rise above $5 again.
Here is a closer look at the financials.
Revenue (Found on the Income Statement)
2017: $1.1B
2018: $1.1B
2019: $1.1B
2020: $891M
Revenues are falling.
Net Income (Found on the Income Statement)
2017: -$182M
2018: -$109M
2019: -$14M
2020: -$66M
Net income in the negative is always a bad sign.
EPS (Found on the Income Statement)
2017: -1.32
2018: -.78
2019: -.10
2020: -.45
EPS has remained negative for the last 4 years and in 2020, declined by over 300%.
Free Cash Flow (Found on the Cash Flow Statement)
2017: -$60M
2018: -$53M
2019: -$32M
2020: $88M
Free Cash Flow increased substantially in 2020. This is a good sign.
Total Assets (Found on the Balance Sheet)
2017: $850M
2018: $698M
2019: $792M
2020: $771M
Total Assets are relatively flat.
Total Liabilities (Found on the Balance Sheet)
2017: $551M
2018: $486M
2019: $559M
2020: $555M
Total Liabilities have remained flat.
Total Debt (Found on the Balance Sheet)
2017: $174M
2018: $184M
2019: $163M
2020: $278M
Total Debt has substantially increased in 2020. They should be using their Free Cash to pay this down.
Total Equity (Found on the Balance Sheet)
2017: $298M
2018: $212M
2019: $233M
2020: $216M
Total Equity is relatively flat.
With a Score of 1/20 and a MOS of 1%, this stock is extremely risky. The biggest issue is the Moat. Manufacturing action cameras isn’t exactly a difficult feat. Some of the competitors listed above are much larger companies (Sony and Nikon) so trying to keep up will be difficult. Now is the time to innovate and serve another industry.
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