Back at Its IPO Price, What are the Odds GoPro Gets Acquired?

Bolton Flautt |

It was just over a year ago when I recommended to my investment club that we should invest in GoPro (GPRO) . Shares were trading around $30 at the time, shortly after it went public at $24 per share in July 2014. After that, the share price more than tripled to over $90 by October 2014. Then the downslide began, back south to reality, topped off most recently by its 15.2% drop after a dismal third quarter earnings report to $25 per share.

The public market can be an unforgiving, category 5 hurricane if you lack the experience, creativity and capital needed to grow at the rate analysts expect you to. I have to admit GoPro has the creative edge, customer base and first-to-market idea going for them, along with solid fundamentals and financial growth to attract any of the giant behemoths in the technology sector (i.e. Google (GOOG), Apple (AAPL), Microsoft (MSFT)) to slap down a king’s ransom that would be nearly impossible to resist.

Google makes the most sense to me because it definitely has the capital to buy anything it wants, especially a measly $3.4 billion market cap darling like GoPro. Also, Google is arguably the most innovative company on the planet and can offer the keys to the kingdom to the ‘little’ camera company if they just say yes…

That being said, the main reason I believe an acquisition makes sense is simply because Google owns YouTube, and it would be the perfect marriage for GoPro’s extremely popular content sharing platform. They can call it ‘YouGo’ and offer every new camera owner a monthly subscription (with or without ads) where they can upload their personal adventures to the cloud for all to see, share, mock and praise.

The days of private home movies featuring little Sally playing Jingle Bells at the Christmas recital for grandma and grandpa to gawk over have been replaced by iPhone videos instantly uploaded to Facebook (FB) and Twitter (TWTR) for show hosts like Daniel Tosh (Tosh.0) to dissect and ridicule, which I think are hilarious for the most part.

All the tomfoolery aside, why would a company like GoPro even want to be acquired? I mean, they just reported $400 million in revenue (an increase of 43% year over year) and $19 million in net income (an increase of 61% year over year) for the most recent fiscal quarter. Strong financials like these coupled with a bevy of positive PR highlights from their third quarter 2015 press release argue against my prediction and suggest the tortoise approach for GoPro instead of the hare.

But, I leave you with this comparative baseball metaphor: if you wanted the best chance to win a World Series… Would you rather play for the New York Yankees or the Cleveland Indians?

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GPRO GoPro Inc. 9.31 0.11 1.20 1,055,968
FB Facebook Inc. 119.62 0.71 0.60 6,118,397
AAPL Apple Inc. 114.30 2.18 1.94 13,187,695
TWTR Twitter Inc. 19.69 0.05 0.25 6,079,636
GOOG Alphabet Inc. 784.60 8.18 1.05 616,048
MSFT Microsoft Corporation 61.69 0.68 1.11 5,725,475

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