[GregWeld]

So -- let's use a recent well known IPO (Initial Public Offering) i.e., GOPRO (GPRO) to learn from and continue to learn from what happens when a coming comes under the critical eye of WALL STREET - via going from a private company to a publicly traded one.

To set the tone -- let me say I have no dog in this fight -- and I AM an owner of at least 3 of these cameras.... and I believe them to be THE brand name in the business.


Today I see it's trading in the 43 to 44 range.... That would make it DOWN 30% since January 1st.... That's a real OUCH if you purchased on it's way up to, or near the top... You've lost even more -- DOWN 52% from the peak trades...

I've said in the past that many times it pays to WAIT and see where these IPO's are going to go --- waiting one or two quarters.... a quarter is 3 months -- so we're not talking about waiting a life time. Sometimes waiting costs you the opportunity to get in early -- so you leave some of the massive gains behind -- but sometimes it's better to wait and NOT lose money! And then have to wait and wait and wait for it to come back to break even!

Now -- HERE'S THE INVESTING 102 part of this....


When a company is hyped up - as was GPRO - and the stock shoots up... there's nothing wrong with that!! But what we don't know is how the company is going to do going forward... the management is "new" perhaps... we know the company is probably relatively new... maybe management needs to learn how to manage "wall street" and it's expectations (I'm thinking back to the big hiccup in Netflix when they made some unexpected announcements)..... Sometimes there's a big learning curve... Sometimes the HYPE just plain overshoots the actual execution and the stock has to adjust back down to the real facts.... SOMETIMES the expectations are exceeded and then some and it's off to the races! But here's the problem with that.... WE DON'T KNOW WHICH WAY THIS IS GOING TO GO. We have no history! We're just Betting with the herd!! Great when it works - not so great when it doesn't.

Now -------- I just found this pretty important info on GoPro....




Questions related to inventory revealed GoPro might have over-shipped end demand in the busy holiday season last quarter. 73% of respondents revealed there had been no stock-outs for GoPro products in the recent past. Bidness Etc believes the lower stock-outs are a function of slowing demand (due to seasonality) and higher inventory left over from the last quarter.

If GoPro did end up over-shipping end demand last quarter, it would explain why the company managed to post brilliant numbers for unit shipments last quarter. However, it would also mean that unit shipments this quarter may come in lower-than-estimated, leading to a possible revenue miss.

However, the problem seems to be at a manageable level. If there had been a build-up of GoPro inventory, retailers would have tried to clear it out by giving discounts. Our survey revealed that only 13% of the sampled locations are currently giving discounts on GoPro products. We believe that retailers are in no hurry to get rid of the old inventory because there is a lot of time until GoPro rolls out the new versions of its Hero series. Moreover, the strong brand presence of GoPro almost insures the retailers against write-downs, due to low demand.


When those two things happen (missing sale or guidance numbers) --- you wake up one morning and you have gotten your ass handed to you! Boom! Huge downdraft!!

Many times this will lead to what's called a "broken" stock. Where fundamentally there is really nothing that wrong with the stock --- but the investors that lost huge money (usually the "hot money boys") drop the stock and move on to something else. We need BUYERS to move the price up -- not sellers! It's usually best to just put a name like that on the "watch it" list... and see what happens over another quarter or two. Sometimes they spring right back - and other times they just continue to drift lower. Better to wait than to lose.

Some times the market is now going to go into the P/E ratio valuation... meaning that everyone is waiting to see if they can be profitable --- or if they can really crank up the sales numbers on a growth path which hopefully then they'll "grow into" the often lofty P/E (Price to EARNINGS ratio).

What we're really wanting to see is big growth - or stellar earnings - or BOTH... in order to assign a "value". It's hard to do this with most IPO's. They're generally still in their infancy as companies. If the P/E gets way out ahead of these numbers -- then the price has to shrink to bring it in to line with reality. I think this is the case with GoPro. The company has killer product... has the name... basically owns the market it's in ------ BUT WE DON'T KNOW WHAT THE SIZE OF THAT MARKET IS YET. Is the market billions or simply hundreds of millions going forward... WHO KNOWS?!

This has been a great IPO to be sure! It's up some 40% if you were able to buy it at the IPO price.... but you've not had a happy ride if you bought it almost anywhere else.

Would I buy this stock? Not yet... I want to see what the real sales/growth rate is going to be. Did everyone rush out and buy one for Xmas -- but hasn't used it - or doesn't feel they need another.... Or did they buy one and can't wait to buy one for everyone in their family? We'll find out...