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GoPro: Vardy Sees Value in Video
06/09/2015 8:00 am EST
Our latest trading recommendation is a textbook case of an overblown-story stock that was an investor favorite and then fell back to earth, explains Nicholas Vardy, editor of Triple Digit Trader.
GoPro (GPRO) specializes in making small, durable, and powerful cameras specifically designed for capturing action activities, including skiing, surfing, scuba diving, and biking.
GoPro’s cameras enable a user to capture action video footage through a combination of accessory mounts (for helmets, bikes, surfboards, etc.), and remote controls (including smartphone apps).
You’ve probably seen footage shot by GoPro cameras, whether you realize it or not.
Expect to see GoPro cameras increasingly used in live television broadcasts, where the devices are really well-suited for capturing fast action.
To this end, GoPro has recently developed partnerships with the NHL and ESPN. And this is just the start. Think of possibilities with events like the Olympics, America’s Cup, and Formula One.
GoPro stock was a red-hot initial public offering (IPO) in 2014, climbing to just under $100 per share before it crashed down to around $40.00.
But now that the stock has settled, I expect the stock to continue its nascent recovery and deliver solid returns to both short- and long-term investors.
GoPro is growing by leaps and bounds. Over the last five years, it expanded from 400,000 units sold to 5.2 million. From 2010 to 2014, revenues exploded from $64 million to $1.39 billion. Revenue growth in 2014 was 41%.
With current sales consisting of 64% in the Americas, 27% in Europe, the Middle East, and Africa, and 9% in Asia, the company has strong revenue and earnings per share growth likely in the years ahead.
The stock has been all over the news since mid-2014, when it jumped 30% after going public at $24. It is currently recovering after a sustained and violent sell-off bottoming in March. It is now in a solid uptrend.
Investors are clearly warming to the stock, convinced by the company’s fundamentals. Buy GoPro at market today and place your stop at $43.
With the stock having a consensus analysts’ price target of $66.71, I am looking for a relatively quick 20% gain in the stock as it finds its feet.
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