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Levi Richardson
Levi Richardson

Is Gopro A Good Stock To Buy

GoPro (GPRO 1.88%) has faced a tumultuous ride as a public company. But it now understands its place in the camera market and has adjusted inventory and services accordingly. For investors, the stock may be a better value today than at any time the stock has been public. Travis Hoium gives details in the video below.

is gopro a good stock to buy

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Travis Hoium is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.

Shares of GoPro (GPRO 1.88%) have been battered badly on the stock market this year amid the broader sell-off, but the action camera specialist has been showing signs of life of late.

GoPro has surged 20% in the last month on the back of a broader recovery in technology stocks. The stock has headed north despite the company's mixed second-quarter results that were released on Aug. 4. While GoPro's top and bottom lines exceeded expectations, the company's outlook turned out to be much worse than expected and points toward a slowdown in sales.

In all, it doesn't look like GoPro will be able to sustain its newly found momentum on the stock market given the headwinds discussed above. But if the stock heads lower, savvy investors may want to buy GoPro, as the company is setting itself for long-term growth.

GoPro (GPRO 1.88%) has long struggled to make its business into one that attracts a diverse group of users across multiple markets, and it has had to find ways to stand out and compete. Its stock struggled right along with it, amid market conditions limiting it as well. With high-resolution cameras available on many smartphones, GoPro has had to somewhat settle for being a niche company supported by sports and thrill-seeking enthusiasts.

GoPro has used this niche market to grow revenue over time directly and indirectly from its core business. And that is helping its stock. There are at least three reasons to think this tech stock can continue to find success down this path. There is also at least one key challenge it faces that potential investors need to factor in.

A perception of being an app without an ecosystem has long hurt GoPro stock. With sophisticated cameras built into smartphones and manufacturers continuing to make improvements, GoPro's cameras held little appeal.

Amid worries about competition, investors have wiped out most of this company's stock price value. Since peaking above $98 per share in late 2014, GoPro stock steadily dropped, reaching the single digits by late 2016. Today, it trades in the $7 per-share range.

Investors also remember that the fear of competition has contributed to its stock selling at more than a 90% discount to its all-time high. Both the stock price and the company depend on making GoPro and its ecosystem valuable to its users.

Nonetheless, a low P/E ratio and the growth of its subscription business could justify a speculative position for more risk-tolerant investors. As long as it continues to dominate its niche, it increasingly looks like a growth stock that could soar.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Garmin. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

GoPro (NASDAQ: GPRO) has faced a tumultuous ride as a public company. But it now understands its place in the camera market and has adjusted inventory and services accordingly. For investors, the stock may be a better value today than at any time the stock has been public. Travis Hoium gives details in the video below.

10 stocks we like better than GoProWhen our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

Along the way, the company has had challenges with inventory, pricing, and of course the ever-improving cameras sitting in our pockets every day in smartphones. But GoPro seems to have found a niche it can win in and keeps incrementally improving its product, as we see with the HERO10 Black camera announced this week. But does that make it a decent stock to own for the long term?

As great as this business transformation has been, it has limitations. If GoPro can't increase sales volume and revenue, it'll have limits on how much money it can make. And with shares trading at 29 times trailing earnings, this isn't exactly a value stock today if the company is shrinking.

Speculating on new products may seem frivolous, but in GoPro's case, investors need to see a path toward growth to be bullish on the stock. And with so many failures in the past, GoPro needs something new to excite customers, or eventually its cameras will be made obsolete by more versatile devices, like smartphones.

The reality today is that GoPro is not a long-term growth stock, and it's hard to make the argument that it's a value for investors, even if it's now profitable. I like the move to more recurring subscription revenue and a general shift toward higher-margin power users, rather than a focus on volume growth, but there are limits to a business serving a niche market.

Until GoPro shows the ability to grow its product line and consistently increase revenue, this is a stock I'll stay out of. There are signs of hope for the company, but not enough to make me bullish on the stock for the long term.

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Zacks' proprietary data indicates that GoPro, Inc. is currently rated as a Zacks Rank 3 and we are expecting an inline return from the GPRO shares relative to the market in the next few months. In addition, GoPro, Inc. has a VGM Score of A (this is a weighted average of the individual Style Scores which allow you to focus on the stocks that best fit your personal trading style). Valuation metrics show that GoPro, Inc. may be undervalued. Its Value Score of A indicates it would be a good pick for value investors. The financial health and growth prospects of GPRO, demonstrate its potential to outperform the market. It currently has a Growth Score of A. Recent price changes and earnings estimate revisions indicate this stock lacks momentum and would be a lackluster choice for momentum investors.

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