GoPro (Nasdaq: GPRO) Stock: Long-Term Success Tied to These Key Factors

GoPro Inc. (Nasdaq: GPRO) stock soared nearly 38% from its offer price today (Thursday) when it reached a high of $33 shortly after it began trading.

GPRO stockGoPro priced its shares at $24 each last night, which was at the high end of the $21 to $24 proposed range. On Thursday morning the stock opened at $28.65, 19% higher than the offer price.

Through the IPO, GPRO raised $427 million by selling 17.8 million shares. Following the deal, the company had a valuation of approximately $3 billion.

According to Dealogic, the $427 million that GoPro raised was the most by a consumer-electronics company since Duracell International Inc. raised $433 million through its 1991 initial public offering.

GoPro designs wearable camcorders that are used to film extreme sports like skiing, snowboarding, and surfing.

The company has used high-profile athletes including Olympic snowboarder Shaun White and world-champion surfer Kelly Slater to showcase the cameras and the footage they capture.

Stuntman Felix Baumgartner filmed his highly publicized space free fall in 2012 with a GoPro camera. The footage from Baumgartner's stunt was seen by millions when it was used in a 2014 Super Bowl commercial.

GoPro publicly filed its IPO prospectus in May, and reported revenue of $986 million in 2013. That was up from $500 million in 2012. The company is on pace to eclipse the $1 billion revenue mark this year after reporting first quarter sales of $236 million.

The company is also profitable at the time of its IPO, which is something that few newly public companies can claim. According to Sundial Capital Research's Jason Goepfert, 83% of the companies that went public in the first quarter of 2014 were not profitable.

In 2013, the company reported profit of $60 million. In the first quarter of this year, profits were $11 million.

While GPRO stock is off to a fast start, there are some challenges for the company that could affect the stock's long-term future...

Challenges GoPro (Nasdaq: GPRO) Stock Must Overcome

Currently, GoPro has command of its industry and boasts a 54% share of the action-camera market. While that's a niche market, it grew by 70% in 2013 according to the International Data Corp. (IDC).

Additionally, GoPro seems to have a loyal fan base. The company shares an abundance of footage captured on its cameras through its YouTube channel, which has already amassed 470 million views and 1.8 million subscribers.

According to Michael Pachter of Wedbush Securities, GoPro would like to create its own programming channel for either cable TV networks, satellite TV networks, Netflix Inc. (Nasdaq: NFLX), or Amazon.com Inc.'s (Nasdaq: AMZN) streaming service.

The key for GoPro moving forward will be monetizing that fan base, and finding success as a media company, because there are some tech giants out there that could easily replicate the company's hardware products.

"Media is the best use of their technology, so it makes sense to enter that space," Money Morning's Chief Investment Strategist Keith Fitz-Gerald said. "My only hesitation is that they better have a really good game plan because they're going up against companies like Apple (Nasdaq: AAPL), Google Inc. (Nasdaq: GOOG, GOOGL), and YouTube."

Fitz-Gerald also cautions investors about today's initial gains. With such a hot IPO market in 2014, many companies are seeing a first day "pop," whether it's totally warranted or not. According to the IPO investment firm Renaissance Capital, 142 companies have already gone public this year - more than any year since the dot-om era of 1999 - 2001. The average first-day pop for IPOs this year is 14%.

"Given the overall favorable environment for tech companies, I think that it gets a nice pop after it IPOs," Fitz-Gerald said. "But I'd be very concerned about the stock's longevity with competition already nipping at its heels. I'm aware of half a dozen competing products that appear to be more wearable, potentially easier to use, and more consumer friendly."

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