GoPro IPO Makes a Big Splash

The company is one of the early players in the wearables market – and the payoff has been big.

Last night GoPro (GPRO) priced 17.8 million shares at $24 apiece, which was at the top of the range of $21-to-$24. Founded in 2002, the company is the developer of popular HD action-sports cameras. And so far in today’s trading, GPRO stock is up an impressive 32%.

Then again, it’s no surprise that the GoPro IPO is a winner. The company is one of the pioneers of the wearables market, which looks to have a bright future. From 2011 to 2013 revenues surged from $234.2 million to $985.7 million. GPRO has also been able to be consistently profitable. Last year, the net income came to $60.6 million.

To gin up even more excitement for the GoPro IPO, the company’s founder and CEO, Nick Woodman, gave an interview on CNBC’s “Squawk Box.”  He mentioned that the key to the company’s success was that it essentially was the first version of the “selfie.” According to Woodman:

“It took a few years to realize that there are a lot more people in the world that want to capture themselves doing want they want, what they love to do, their passions and interests, than there are that want to capture other people.”

Yet the reaction to the interview was a bit mixed (at least within the twitterverse):

The GoPro IPO was actually available to retail investors, which was a smart move.  After all, the company has an avid fan base.  So GoPro provided 1.5% of the Class A common stock for the LOYAL3 platform, which is a system that allows any investor to buy IPOs for as little as $100 — without paying a fee. But investors only got small allocations.  Here’s something from Twitter (TWTR).

OK, and what about the prospects for GPRO stock? Well, according to Asheesh Advani, who is the CEO of Covestor (an online marketplace for investing), he thinks the valuation is pricey, especially when compared to other companies like Apple (AAPL):

“Clearly this valuation is not purely based on the business prospects of selling its durable cameras, as most consumer-electronics products become commoditized fairly quickly. The real investor appetite for GoPro is based on the potential to monetize the sharing of all the mind-bending videos filmed by its customers.”

In fact, in the GoPro IPO S-1, the company refers to itself as a “media” player.  To this end, it has been aggressive with social media, with 7.2 million Likes on Facebook (FB), 2 million followers on Instagram and almost a million followers on Twitter.  But the real hotbed of social activity has been on Google’s (GOOG) YouTube.  During Q1, GoPro customers averaged about 6,000 daily uploads, totaling more than 1 billion views.

But it is important to keep in mind that consumer electronics IPOs have a sketchy track record. Just look at Skullcandy (SKUL), which came public in July 2011 at $20 apiece. The shares are now trading at a only $7.39.  The fact is that the consumer electronics space is rife with competition and vulnerable to fads.

And as for the GoPro IPO, these are all clear risks.  In Q1, revenues dropped by 7.6% to $235.7 million.  There is also much more competitive pressures from companies like Canon, Nikon, Samsung, Sony (SNE) and Garmin (GRMN).  Even Google wants a piece of the market, as the company announced its wearables platform this week.

But such concerns are probably long-term issues.  In the meantime, GRPO stock has benefited from a robust IPO market as well as from its strong global brand and innovative products.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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