Courtesy of ZeroHedge. View original post here.
Having soared to almost $100 – because it was a social media company – Camera-on-a-stick maker GoPro has collapsed 75% from its highs and broken back below its $24 IPO Price for the first time.. which is odd as in July, CNBC's Jim Cramer said "Go Pro is heading higher… I know growth oriented money managers who would gladly pay as much as 60 times earnings for a company with these numbers. I think GoPro's a bargain at these levels."
First up was GoPro, the maker of popular, high-quality action cameras that trades at 31 times next year's earnings estimates. That can seem absurdly expensive, given that the average stock on the S&P 500 sells for about 18 times earnings.
The bear case for GoPro is that many view it as a hardware retailer with a product that can eventually be replicated by the competition, which will ultimately dent its reputation.
The bull case for GoPro is more complicated, as many believe that GoPro has a lot more time before a competitor will be able to design such a good camera. Additionally, GoPro is building out a media ecosystem that allows millions of people to generate content and share it. That's a dream come true for a market that already loves Facebook and Google.
When Cramer looked at the numbers, he knew immediately why GoPro's valuation was justified. It grew revenues by 71 percent year-over-year, and its earnings more than tripled year-over-year. It released strong guidance for the year as well, as many of its snazzy new products will be in stores for the holidays.
"I know growth oriented money managers who would gladly pay as much as 60 times earnings for a company with these numbers. I think GoPro's a bargain at these levels," Cramer said.
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