GoPro's 'Untapped Opportunity'

Despite GoPro Inc. GPRO declining over 7 percent the past five days, Wedbush detailed a potentially significant opportunity in a report issued Monday.

Analyst Michael Pachter believed “GoPro’s high valuation multiple reflects a combination of expected high levels of sales growth and a largely untapped media revenue opportunity.”

While sales of GoPro equipment are already familiar to investor’s, a key area of focus “going forward will be better monetization of user-generated content (“UGC”) and the company’s originally-produced content (“GoPro programming”). This content (both photos and videos) is disseminated through the GoPro Network, a collection of GoPro Channels on Facebook, Instagram, Twitter, and YouTube, with many more channels expected to materialize in future periods,” according to Pachter.

The report noted that “due to the abundance of and strong interest in GoPro content online, management believes that there are many more fans of its content than there are of its physical products, making the company more of an entertainment media brand than a consumer product company.”

Pachter observed that in 2013, “GoPro users uploaded roughly 2.8 years of video content to YouTube with “GoPro” in the title, yet the company estimates that only a single-digit percentage of content gets shared at the present time.”

The potential to monetize content “should change in future years, as GoPro believes it may be able to help users license their content in a similar manner as YouTube does. According to GoPro management, 90 percent of YouTube’s content submitters give YouTube the right to monetize their content. GoPro believes it can have a similar or better conversion rate than YouTube, likely due to strong brand loyalty.”

Wedbush initiated coverage Monday with an Outperform rating and $81 price target.

GoPro Inc. recently traded at $69.01, up 6.31 percent.