GoPro Inc Working Hard To Justify Its Valuation

GoPro stock has declined more than 13% in the last five sessions. Unlike its customers who enjoy extremes, investors are walking back from the edge. At the Consumer Electronics Show (CES), Sony showcased its new action cameras with high-end specs. The recent downturn in stock suggests that GoPro is still a tough ride for those who aren’t thrill-seekers, reports The Wall Street Journal.

GoPro sees a big opportunity in China

The company plans to expand in international markets this year. GoPro CFO Jack Lazar said that the company was looking to enter Europe with a direct distribution model. But overseas expansion would take time. Founder Nick Woodman said in an interview that the company is likely to enter China this year, and it has “every opportunity to succeed in China.”

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However, Citigroup analysts believe that the San Mateo-based company’s non-U.S. growth is likely to be “relatively muted” this year. GoPro has lost about 33% since the launch of the new Hero4 action cameras. But the stock is still trading at 50x forward earnings. Now the company is working hard on multiple fronts to justify that valuation.

GoPro is working to build a media business featuring videos captured by its cameras. At CES, it announced an agreement with LG Electronics to include its GoPro Channel to LG smart TVs. GoPro Channel is already distributed through social media channels, platforms like Xbox One and Xbox 360, and in-flight entertainment on Virgin America.

GoPro more than doubled its R&D spending

 

Woodman also teased about drones at the event. Rumors suggest that GoPro is working on consumer drones. The company also announced at CES that it will soon release a firmware update to add new photo and video modes. According to the Journal, GoPro has more than doubled its R&D spending, and about one-third of it goes to software and services.

Analysts expect GoPro’s fourth-quarter sales to jump 60% from the last year. Meeting the Wall Street estimates will be key to the stock. Moreover, about 76 million shares will get unlocked in February, increasing the float.

GoPro shares fell 1.03% to $59.47 in pre-market trading Friday.