GoPro Inc (NASDAQ:GPRO) Stock Hits Multi-Month High: What to do Now?

Action camera maker GoPro Inc (NASDAQ: GPRO)  has been struggling for more than half a decade, and that has been reflected in the poor performance of its stock as well. While it is true that the GoPro stock has been written off by many, it appears that the stock might now actually offer higher gains than losses.

Key Factors To Watch

Hence, it could be worthwhile to take a closer look at the GoPro stock. Back in 2014, the stock had soared as investors hoped for explosive growth, but that did not come about, and the stock has since sunk by 95% from its highest levels. In March, it hit a record low.

However, in the full year 2019, the company managed to deliver a modest profit of $35 million. The company is now valued at only 5% of 2014 valuation, but that being said, the bullish thesis on the stock is not a particularly weak one. Having generated revenues of $1.2 billion and profits of $35 million in 2019, a valuation of $750 million seems correct.

That works out to trailing 12-month price to equity ratio of 21. On a price to sales calculation, the GoPro stock trades at 0.63. The average price to sales ratio of S&P500 stocks now stands at 2.16.

That being said, valuations only matter if the company has a viable business, and in that regard, it should be noted that GoPro has reshaped its model. The company announced at the conclusion of the first fiscal quarter that the number of members on its GoPro Plus subscription service touched 355000, which reflects a year on year rise of 14%.

It might not be a major profit-making vehicle and will possibly drive $40 million worth of annual revenue, but it is a place that nudges consumers to purchase new products. It could have long term value for GoPro. Additionally, the company’s direct sales arm has also come to the fore and, in 2019, generates 10% of the revenues. If it continues to grow then, GoPro could make significant wholesale profits in the long run. It is a stock that could be put into the watch lists by investors at this point.

About Travis Garlick 1765 Articles
Been writing about and trading stocks since 2013. Manage a group of micro-cap investors on Facebook with over 15,000 members. Turned $8,500 into 185k the first year I started trading stocks and haven't looked back.