GoPro (Nasdaq: GPRO) Stock's Most Important, Overlooked Number

GoPro Inc. (Nasdaq: GPRO) stock jumped as much as 8% in after-hours trading today (Thursday) after the company reported earnings per share (EPS) of $0.12 for the third quarter. Analysts had expected EPS of $0.08.

GPRO Stock GoPro reported revenue of $280 million, which beat consensus estimates of $263.5 million. The company's guidance figures had revenue between $255 million and $265 million.

That revenue total was a 45.8% increase from last year, and a 14.5% rise from last quarter.

The company also reported operating income of $27.6 million in Q3. That was up from just $2.3 million last year and $17.8 million last quarter.

The biggest reason for the earnings beat: strong camera sales. GoPro unveiled its newest camera, the Hero4, in September.

GoPro's strong sales figures are not a surprise. The timing for the Hero4 launch was perfect. GoPro has been riding a wave of momentum since its high-profile initial public offering in June. The IPO expanded the company's brand awareness.

The momentum will continue through the holiday season, so we're likely to see strong sales figures in Q4 as well.

But as we've been saying at Money Morning since the GoPro IPO, the story with this company is not its camera sales. There is another key figure that tells us more about GRPO as an investment...

GPRO Stock: The Real Story in Today's Earnings

The most interesting part of today's GPRO report is the growth of its media business.

GoPro boasted a 92% year-over-year increase in the amount of content published on its YouTube channel in Q3. Likewise, the number of views on the channel was up 99%. Finally, video minutes watched were up 133%.

GoPro Stock History

The GoPro IPO in late June was one of the most hyped initial public offerings of 2014. The company raised $427 million through the deal, and the stock immediately took off. After four days, GPRO stock was up 103%. At its early-October high, it was up 310% from its $24 offer price.

But the drops for GPRO have been stark, too. On Oct. 2, shares fell 11% in just hours. That day, Chief Executive Officer Nick Woodman found a loophole that allowed him to sell $532 million worth of stock to charity.

Even good news hasn't always translated into profits for GPRO shareholders.

In Q2, the company beat earnings estimates by $0.02, and posted a year-over-year revenue increase of 38.1%. That still wasn't enough to lift the shares. They dropped 15% following the report.

The company's YouTube metrics may seem trivial, but they play into the company's larger vision.

When GoPro held its IPO in June, company officials detailed their desire to turn GoPro from just a hardware company into a media company.

At the time, it had already amassed 470 million views and 1.8 million subscribers on its YouTube channel. The company regularly posts footage from extreme sports athletes using its devices.

Now, GoPro officials reportedly want to create their own programming channel. Cable TV networks, satellite TV networks, Netflix Inc. (Nasdaq: NFLX), or Inc.'s (Nasdaq: AMZN) streaming service are all options.

Today's strong growth in content and users is a good first step for the company.

However, if GPRO stock is going to succeed in the long-term, company officials will need to push the media content portion of the business much further. There's simply too much competition mounting in the camera market.

"Media is the best use of their technology, so it makes sense to enter that space," Money Morning 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."

"There is no compelling evidence that GoPro can provide a lasting alternative to the greatest threat to the company's relevance - smartphones. And that's the crux of the issue," he continued. "The company offers a feature - albeit a really cool one. There's no reason whatsoever to believe that its competitors won't catch up... that Apple and others won't come out with products that match or exceed GoPro's capabilities or be easier to use."

Shares of GPRO had dipped 8% in early trading this morning, before closing at $68.25. That was a daily return of 0.5% before the earnings report.

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