IPOS are often a bad bet. Not really investing but gambling. Trading at over 75 p/e is pretty ridiculous. This is a very niche market for their products. Th eprice now is all hype and deeply overvalues according to their fundamentals.
But hey its a gamble. As long as you are not holding the bag in the end u should be good. If u r in, it would be wise to take profits and run. Def not a long ter, hold. At $36 right now it would be a better short stock when the hype dies!
It's true that expectations are high but that doesn't mean the stock can't go much, much higher. I'm sure folks thought Yahoo was retardly overpriced in 1997 at 900x earnings. Yet it eventually went to 1700x earnings and shares went up almost 8,000% before the bubble burst. Don't bet against momentum until it's run it's course.
I am not disagreeing with u at all. Stock could grow 100 times its value for all we know. Momentum should not be the only factor while gambling on GPRO. It has a very limited growth potential as the its product is limted. If I was going to speculate a company producing products with over 75 p/e it sure wouldnt be one just making video cameras. The better speculative bet would be on 3d printing with a much bigger potential upside. GPRO only getting hype cause its IPO is new and people jump on bandwagons all day. Mostly in part of the media.
I am just saying it is extremely risky for a non proven company with little earnings and limited upside. That doesn't mean u cant make money on the stock. Could easily double or triple within the year. But for every Yahoo there are 10 dogs.
In the book Random walk down wallstreet they say new IPOs in history have underperformed the stock market by 4% over 5 year terms. IPOS generally trade over their IPO price for the first 6 months but quickly fall to initial IPO price. Take for example Twitter, They shot up like a rocket and shot down just as fast and recently was trading at below the IPO price many months later.
I think investing in good solid companies with a good history is a good idea. But trading into something that is very hard to predict is just gambling. How far do u think GOpro can really grow to? End of the day its abut the business and selling small video cameras to a small niched demographic is extremely limiting. They would have to double there business 3 years in a row to justify todays share price even.
But GOPRO may make a great short term investment. Most people think they can beat the market with their selective stock picks but the fact is most dont.
Warren Buffett on IPOs
May 18, 2012
“It’s almost a mathematical impossibility to imagine that, out of the thousands of things for sale on a given day, the most attractively priced is the one being sold by a knowledgeable seller (company insiders) to a less-knowledgeable buyer (investors).”