Action camera company GoPro Inc (NASDAQ:GPRO) IPOed yesterday at $24, and with buyers in a frenzy to own shares, the shot up to more than $31 by the end of its first trading day.

GoPro

However, according to Forbes Contributor Niham Arora, buying GoPro Shares right now is “extreme speculation”. Arora points out that almost $3 billion of GoPro Inc (NASDAQ:GPRO)’s $3.86 billion valuation is based on optimism about future sales and the fact that the firm is somehow seen and valued as a media company instead of a gadget company.

GoPro valued as a “media company”

The Forbes article goes on to suggest that GoPro chief exec Nicholas Woodman has “successfully pulled off alchemy by selling a gadget company stock as a media company to the investors.” In fact, according to Arora, this magical redefinition accounts for $3 billion out of the $3.86 billion valuation of the company.

He compares GoPro Inc (NASDAQ:GPRO) to  well established camera company Nikon . Nikon had revenue of $11 billion in 2013, and has a price-to-sales multiple of just over 0.6. GoPro, on the other hand, has revenues of almost $1 billion, but somehow has a price-to-sales multiple of nearly 4.

“Gadget” companies are typically assigned low multiples because gadgets eventually get commoditized, and its difficult to impossible to continue to come up with hit gadgets. The Flip Video camera was the hottest video camera on the market just five or six years ago. In fact, Cisco paid $590 million for the maker of Flip Cams. However, the low-end camera market became so competitive that barely two years later Cisco wrote the company off and shut down the business.

Developing its own ecosystem

GoPro Inc (NASDAQ:GPRO) enthusiasts say GoPro can eventually become an Apple Inc. (NASDAQ:AAPL) complete with its own ecosystem, but that certainly seems unlikely. Arora details his argument below. “First, there is no ecosystem with GoPro like operating systems such as iOS and OS X, e-commerce service such as iTunes, and cloud service such as iCloud. Second, in spite of Apple’s tremendous success to become the most valuable brand in the world and its massive cash hoard, Apple trades at a price sales multiple of about 3.”

GoPro bulls can, however, make a valid argument that GoPro Inc (NASDAQ:GPRO) is growing very fast. The firm’s 2013 revenue was double 2012 revenue. But, given the rapidly growing number of competitors in this market, the revenue growth from will almost inevitably slow and then decline. While there is some potential that the firm can develop a real “media platform”, at this point the media business of the company is untested, and quite frankly, somewhat hyped by management.