GoPro: Great product, terrible company? But this thing could help her tremendously!

Looking at the fundamentals, is GoPro in its current form a value investment? Cash is 2x the long-term debt. Yes, earnings growth has slowed, but they have a subscription model with 2 million members, which creates a strong revenue base. P/E is about 2.9. The stock has also had a solid washout, the nearly 50% drop since January looks oversold and undervalued at the moment. It used to be considered more of a growth title. That label may be over, though. I can think of one possibility that could help GoPro a lot, though.

In fact, I think one of the few things that could help GoPro in the long run (and thus make $GPRO a true value stock) is an acquisition by another company. Off the top of my head, I can think of a classic example like $AMZN.

GoPro, Inc. develops and sells cameras, attachable and wearable accessories, and subscription services and software worldwide.

Where does it stand currently?

To be honest, I actually like the company almost not at all at the moment. But I write the company on purpose. Their product, for me, is absolutely great. Everyone can convince me about the quality of cheaper copies from China and the like, but I won't give up the opinion that GoPro's position as the leader in this segment is completely deserved. But let's get straight to the action.

Two key indicators of why I don't like it much -

Insiders are selling like hell. Only one insider has bought in the last year. In contrast, 5 have sold.

The other... and significantly worse - Their cash seems to be coming from the issue of new shares. Even worse, they have issued new shares in the past. That's what they've looked like over the years. Source

79 million in 2011

74 million in 2012

99 million in 2013

124 million in 2014

146 million in 2015

139 million in 2016

138 million in 2017

139 million in 2018

145 million in 2019

149 million in 2020

163 million in 2021

I haven't found in the news (admittedly by a very cursory reading) that they explain this dilution. But the history of dilution and insider sentiment speaks pretty clearly.

Another concern is that GAAP says it has been loss making 10 out of 11 years. They are now 1 year profitable, but it's not clear to me if this is a coincidence or a turning trend based on fundamentals.

On the other hand - GoPro has a significantly high return on equity. Second, even compared to the industry average of 22%, the company's ROE is quite impressive. So the significant 76% growth in net profit that GoPro has seen over the past five years is not too surprising.

What about acquisitions?

They have a great product that just about everyone knows. Unfortunately, the circle of active users is probably not really that large, and on top of that, the company hasn't managed its finances all that well. On top of that, they are actually playing against themselves - older generations of their cameras tend to be so good that the user has no need to upgrade for several years. So they are actually stealing an already small pool of users from themselves. The competition in GoPra's price level is not that strong. On the other hand, in the budget segment, the other brands are crushing them at the line.

https://www.youtube.com/watch?v=0zZMJGklEvU

What could help them though would be an acquisition by a bigger company. Don't take me too seriously, this is just my wild idea. I don't think there will be much interest in using their technology in another sector. Cameras and recording equipment in general is definitely not a technology with a huge moat that someone can't replace at a fraction of the cost. GoPra's strength is in the brand and the ecosystem. It occurs to me that perhaps Amazon might want to include them in the portfolio of brands under its wing. A situation where GoPro is kind of in disarray could definitely play into Jeff's hands.

But the chances are, of course, pretty slim. Especially at a time when Amazon has announced its umpteenth huge acquisition this year. The most recent one was discussed here earlier today in the discussion for this article:

3 reasons that make Amazon an even more attractive investment

What is your opinion about GoPro? Are you holding on, considering buying at a better price, letting go?

Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on internet data and a few other analyses. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.