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Will GoPro's Pricing Leave Investors Smiling?

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Will GoPro's Pricing Leave Investors Smiling?

Certainly, there will be smiling faces as GoPro (NASDAQ: GPRO) opens for trading Thursday.

Maker of the versatile, go-anywhere camera, GoPro priced its 17.8 million share offering at $24, at the high end of the expected $21 to $24 range.

Because it priced near the high end of the range, with 123.1 million outstanding shares, the company will kick off trading with a value just shy of $3 billion.

With $985.1 million in revenue for the year ending 2013, GoPro would find be valued at nearly 3x sales, in-line with mammoth companies like Procter & Gamble (NYSE: PG). GoPro is nothing like steady-as-she-goes P&G.

GoPro sees the competition in the versatile camera-space being a future problem. Being proactive, the company is in the process of pivoting, focusing on becoming a media-brand company. If successful, GoPro will need to be valued more like Monster Energy (NASDAQ: MNST), rather than a camera maker. Monster, an energy drink maker that loves to brand itself, currently trades at a 4.7x sales figure, which makes GoPro look undervalued.

Over the last year, the company has worked diligently to put an easy-to-use ecosystem in place that would allow users to capture, edit and share all of their activities.

According to a recent S-1 filing, through, “a collection of GoPro channels hosted on a variety of platforms, GoPro has received over 7.2 million, “likes,” on Facebook (NASDAQ: FB), 2 million followers on Instagram, 950,000 followers on Twitter (NYSE: TWTR), and 1.8 million YouTube subscribers with over 450 million video views.”

Related Link: GoPro IPO Valued At $3 Billion: Is It The Next Flip Camera?

GoPro believes it needs to continue to develop innovative cameras, but to grow, it must scale as a media brand. In the filing, management stated, “We are investing to scale GoPro as a media entity and develop new revenue opportunities by increasing production of GoPro originally produced content,” and it plans to, “invest to develop, distribute, and promote GoPro programming on additional partner platforms such as Virgin American and Xbox Live.”

Along with the partnerships, GoPro will continue to develop and expand their strategic marketing partners, such as being the primary technology enabler for major athletes and sporting events, like the X Games and Shaun White.

Half of the IPO money will go to GoPro. The primary purpose of the offering is to repay a $111 million term loan, and secondly to provide for general corporate purposes. The other half will be shares offered by employees, executives and venture capitalists.

Underwriters for the offering are J.P. Morgan, Citigroup and Barclays.

Disclosure: At the time of this writing, the author holds no position in the mentioned securities.

 

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