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Why GoPro is Set for a Strong Wall Street Debut

Back in February, I wrote about a company that was so red hot, I pegged it as “The Sexiest IPO of 2014.”

The company was video camera maker, GoPro.

Having tracked it for some time, I took notice because the firm had just made the next move in its growth phase by quietly filing for its IPO with the SEC.

I say “quietly,” because management took advantage of a provision in the JOBS Act that allowed it to file a letter of intent to go public without providing the company’s recent financial information.

Red flag?

Far from it.

For me, that secrecy was irrelevant. Why?

Well, first, because the JOBS Act provision legitimately allows private companies to file confidentially, as long as they’re generating under $1 billion in annual revenue.

And second, because GoPro’s sales have exploded higher every year.

That’s exactly what happened in 2013, as well.

And now it’s official…

Inside GoPro’s Little Black Book

On Monday, GoPro filed its S-1, which gives a deeper look into the company’s key numbers.

Here’s the quick and dirty…

As you can see, the company more than tripled its revenue in 2011 and more than doubled sales in 2012.

Last year wasn’t quite a double… but it was pretty darn close, surging 87% higher to $985.7 million.

And take a look at what GoPro has done so far this year…

In the first quarter alone, the company beat its total revenue for all of 2011.

Impressive, for sure.

But what stands out even more is the fact that GoPro continues to grow its bottom line, even as the cost of revenue climbs exponentially.

So how is GoPro able to do it?

Bang for the Bucks

The tale of the tape is in GoPro’s ability to get a terrific return on its investment – particularly with its rising sales and marketing expenses…

GoPro’s 2011 net income hit $24.6 million – up 112% over the $11.6 million posted in 2010. Yet the company only had to spend $50,515 more in marketing costs to do it.

In other words, it spent $50,515… and got $13 million more in return.

It did even better in 2013… raising its marketing costs by $41,000 and making $28 million more in bottom line income than it did in 2012.

This underscores what I said back in February: “Like Apple (AAPL), GoPro has an exceptionally loyal fan base. GoPro users love their devices, thanks to the brilliant technology. And like Apple, GoPro markets its products and brand name brilliantly.”

A Marketer’s Dream

And when I talk about “brilliant technology,” I’m talking about the ability of GoPro’s cameras to take flawless video – even when being thrown around on the bodies of today’s extreme athletes.

For example, I mentioned that a GoPro Hero camera was strapped to Austrian daredevil, Felix Baumgartner, to film his mind-blowing freefall to Earth from outer space…

Marketing doesn’t get much better than that!

The question is: Where does GoPro go from here?

GoPro Needs to Go Big

If you’ve followed my C.H.A.O.S. Strategy recently, you’ll know that one of the most important metrics behind any company is its scalability.

As in, how does a company plan to take its business to the next level?

What other areas does it aim to gatecrash so it can not only diversify and guard against downturns, but also grab more market share?

This is what GoPro needs to tackle.

You see, while Monday’s filing revealed several positive aspects about the company’s growth over the years, it showed some negatives, too.

In the first quarter, for example, GoPro’s revenue was down 7% over Q1 2013, as shipments declined by 100,000 units. Net income saw a 52% drop.

What gives?

Well, given that GoPro monopolizes more than 70% of the wearable sports camera market, it’s not that surprising.

Sure, the company will continue to make money from new cameras – especially if it can evolve them alongside the growing wearable technology market – but GoPro has sold so many cameras (high-quality ones that last for years, mind you), it needs to find other revenue streams if it wants to scale its business and attract investors.

Well, it has a plan…

Welcome to the GoPro Ecosystem

As GoPro has grown, its cameras have now become a means to a much larger vision.

CEO Nick Woodman’s strategy from here – and the largest growth driver – is to create a mass media ecosystem that will turn GoPro into its own content network.

It’s already in the works, too…

As it stands, GoPro cameras help thrill seekers and regular folks alike capture photos and videos of themselves in action.

And GoPro users are only too keen to share their content with family, friends and complete strangers on Google’s (GOOG) YouTube website. In fact, GoPro is currently YouTube’s fifth-largest group, with roughly 1.9 million subscribers.

You can also find the GoPro channel on Microsoft’s (MSFT) Xbox One and Virgin America.

But GoPro plans to expand its online, content-sharing community by developing its own platform for editing and sharing videos within its own GoPro ecosystem. How?

GoPro’s Marketing Strategy? Get Users to Do It!

Well, it doesn’t intend to reinvent the wheel and compete with YouTube. Instead, GoPro will leverage existing social platforms like YouTube, Vimeo, Facebook (FB), Twitter (TWTR) and Instagram to expand its network and engage its community.

For example, it challenges its users with contests like “Who can make the best video of a basketball trick shot?” and “$20,000 to the person with the best GoPro surfing clip on the North Shore of Oahu.”

In doing so, GoPro gets great footage to use in its marketing campaigns. So essentially, GoPro uses its own community to help market its devices to non-GoPro owners. Genius!

This explains the minimal spending on marketing and huge growth in the last few years.

GoPro also wants to use its channel for education, enlisting the best extreme athletes to narrate their moves while performing, in order to teach aspiring future stars.

The potential for GoPro here is massive. Especially since the company has some of the most passionate and active customers on the planet.

That’s why I believe GoPro is still 2014’s sexiest IPO.

Your eyes in the Pipeline,

Marty Biancuzzo

Marty Biancuzzo

, Technology Analyst

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