GoPro(GPRO) up 36% – Bf Gf Portfolio

Nick-Woodman

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Just to try it out, I will be updating the blog posts with quarterly results and developments of the companies I am invested in.  I think it may get harder and harder as I own more and more companies.  In this case, I am very happy to see that GoPro (GPRO) has reported ANOTHER record breaking quarter.

 

I bought GPRO at $38.10, 11 March 2015 as recorded in this post.  I did a simple analysis in that post as well.  I then proceeded to open a thread on a forum so that people can add on more information or discuss about GPRO.  Little did I know, some jackass started slamming GPRO ( I am okay with that by the way…) but he then proceeded to call me a speculator and told me I was not welcomed in the value investing forum.

 

What an asswipe!

 

I am very disappointed that he did not call me a gambler… At least a gambler sounds more cool and dangerous unlike ‘speculator’….pfffttt…  The forum admin has since removed his insulting posts.

 

Anyways, when I invest, my philosophy is not to prove to anyone that they are wrong, and I am right or I am better.  I try to eliminate ego from the equation.  I choose to focus all thoughts on the only 1 reason I invest:  To Make Money.

You can read about my thoughts on the investing mindset here.

 

Enough of internet trolls; let’s move on to GPRO updates.

 

Some numbers:

– Record breaking quarter; 50% increase in revenue Q-on-Q to $363M ( that’s freaking insane btw!)

– Diluted EPS increase 37.5% Q-on-Q.

 

Developments:

GPRO announced that it is buying over Kolor, a company that creates 360-degrees immersive and interactive videos.  That means, you can actually click on the arrow buttons in the video and have a 360-degrees view of the action.  That’s crazy innovation!  It provides a virtual reality experience for the viewer!  To try it out, scroll all the way to the bottom and look at the video ( * Do use your google chrome browser to navigate the arrows to get the 360 experience!)

As I am writing this, the price is about $52.  That represents a 36% gain in a span of less than 2 months.  The good thing about being a fundamental investor is, you feel happy when your company is doing well and your shares are worth more; you also feel happy when the market is pessimistic about your company and the stock price drops.  So whether the stock price goes up or down, you feel happy! Yaay!

Some Arguments against GPRO skeptics

When I did my post on the blog and on the forum, skeptics came and poured cold water.  It’s perfectly fine and I encourage it.  But let me counter-argue some points brought up.

There are many competitors in the action camera industry with better specs (like Yi from Xiaomi)

Okay, go to Youtube now and google this words “xiao mi yi action camera”.  All you see are mostly reviews and advertisements.  Now google “GoPro”.  GoPro has a huge following in Youtube and Instagram.  (For numbers please refer to my earlier post.)

Also, the competitors don’t have the laser-like focus on the action camera industry like GPRO, the company that INVENTED THE INDUSTRY.  GPRO still has a content management system and a long-term vision to become a media company.

As for lousier specs, GoPro makes up for that with better branding and a strong network.  This is the same argument for Apple phones vs Androids.  There will always be competition.  GPRO is actually a good case study for entrepreneurs, showing that even if you carved out an industry, people will see your success and want to come and fight for a piece of the pie.  That’s the reality of business.  Competition is inevitable.

GPRO caters to teenagers and teenagers are fickle customers.  GPRO will just be a fad.

This is a very far-fetched argument to make.  So does this mean that young customers are fickle?  Look at Disney, Marvel and Activision.  These companies cater to younger age groups yet they all do very well.

Growth will slow down

Yes it will.  CAGR from 2011-2014 is at 81.28%.  And it’s recent record breaking quarter is contributed by the GoPro 4 camera which was released late last year.  But will the growth suddenly fall to 20% in 1 year?  I don’t think so.  I think we are just at the very early stages of the growth momentum.

Apple has a patent that will bring GPRO down!

Apple has a lot of patents that will bring a lot of companies down (cashless payment, electric cars,etc.)  If you are so scared of Apple or even Google, then just dump all your savings in these 2 companies or don’t invest at all.  Besides a patent doesn’t mean they have started building the product yet.

You bought at a PE of 41! It’s overvalued!

As the earnings grow, the PE which I bought at will become cheaper.  I actually thought that the PE of 41 was quite cheap for GPRO considering its earnings growth.  Because I felt it’s cheap, I had dumped in a mid-sized bet.  Anyway, we shall do a calculation and re-evaluate the PE and price that I bought at again in Q4 2015.

You analysed based on past history.  You should do a DCF projection with market penetration in mind.

 DCF projection is ALSO based on past history…  Market penetration of what?  Surfers? Skateboarders?  Add up total number of extreme sports enthusiasts? Humans?  Valuation methods have to be examined on a case by case basis.

Conclusion

I am very comfortable owning GPRO.  CEO Nick Woodman recently became the highest paid CEO in America.  Currently I have no qualms about that, considering that sales have been phenomenal these past few years.  Being a GPRO shareholder also makes me feel like I am vicariously living in an exciting entrepreneur success story.  (How I wish I can start a company like GPRO…..)  For now, I am just excited to hold on, sit on the sidelines, and cheer this team on!

Oh yes, here’s the 360-degree video:

(Click on the arrows to rotate camera view!)

 

 

Stay tuned.  Coming up next, is another of my favourite stocks in the Bf Gf Portfolio………MasterCard!

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3 Comments

  1. Joel

    Good work! Jardine then this, 2015 has been a good year so far.

    Reply
    1. The Bf (Post author)

      I didn’t do anything man. The CEO Nick Woodman did all the heavy lifting.

      Hope the rest of the companies all do well beyond 2015.

      Reply
  2. Pingback: MasterCard (MA) – BfGf Portfolio

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