GoPro Inc: Volatility Is The Name Of The Game

GoPro Inc: Volatility Is The Name Of The Game

There’s always been a line drawn between those who invest and those who trade. Companies like GoPro Inc (NASDAQ:GPRO) have consistently helped to draw that line in stark relief. Volatility is going to be central to movements in the company’s shares for a long time to come. Traders will enjoy that, those investing in the company won’t even care that much.

GoPro Inc (NASDAQ:GPRO), for those who’ve missed the company since its initial public offering at the end of June, is the maker of a selection of HD cameras marketed at people engaging in violent physical activity, such as mountain biking or windsurfing. The company’s stock has increased more than 68% above its IPO price since hitting the market, and its future has been the subject of massive debate as it continued to rise.

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GoPro means volatile trading

The violence of the activities that necessitate the use of a GoPro Inc (NASDAQ:GPRO) camera should mirror the violence of the company’s stock going ahead. According to a Raymond James report on the firm, which initiates coverage of the company, “The future range of potential equity values for GPRO are wide given earnings sensitivity to relatively small changes in annual sales combined with the still very small volumes of devices sold annually.”

Shares in GoPro Inc (NASDAQ:GPRO) have not been all that volatile since they original began to appear on major indices, but the company’s wildest swings are surely ahead of it. Expect the company’s first public earnings report, which is due to hit the street on July 31, to bring with it a handful of that promised volatility.

“Volatility tends to be extreme” in situations like the one GoPro Inc (NASDAQ:GPRO) finds itself in, so those that are investing in the company’s future should be aware of the massive swings that may happen while they’re sitting on the stock. The problems in valuing the company correctly are compounded by the fact that it is not simply a consumer electronics company, it’s also a media business that could be even more lucrative going ahead.

Categories aren’t easy at GoPro

The Raymond James analysts reckon that GoPro Inc (NASDAQ:GPRO) “has a truly unique opportunity to build a next generation media company with limited content costs, yielding significant potential future equity value.” The company’s media arm, which involves user generated video content being uploaded to its version of a social network, could be the most valuable part of the business, but it’s far too immature to value properly right now.

Given that GoPro Inc (NASDAQ:GPRO) is not just selling a camera, the company becomes much more difficult to properly categorize. The company’s business is making it more of a lifestyle brand, like a very specialized and dedicated Apple Inc. (NASDAQ:AAPL), but that’s not a great comparison either.

According to the Raymond James report, which was authored by Tavis C. McCourt and Daniel Toomey, GoPro Inc (NASDAQ:GPRO) should be valued as something akin to a “mature, high margin consumer device/brand” company. That methodology leads them to a rating of Market Perform on the company’s stock, and no firm price target on the company’s shares.

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