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GoPro IPO Puts These ETFs in Focus

Zacks Equity Research

GoPro finally made a blockbuster debut in the markets in what was an extremely busy IPO week, marking the largest stock offering by a consumer electronics company in 23 years. Its shares skyrocketed 31% to close at $31.54, after hitting an intraday high of $33.
The wearable action-camera maker, which made its listing in the NASDAQ under the symbol GPRO, offered its stock for $24 per share (the high end of its price band), thereby raising $427 million through its IPO. This is the highest ever by a consumer electronics company since the debut of battery maker Duracell International Inc. in 1991, which had gathered $433 million, as per a Wall Street Journal report  (Duracell is now a unit of Procter & Gamble Co).
GoPro in Focus
The company has made a niche for itself with its popular action-sports-oriented cameras and accessories. These devices can be fastened to a helmet or the front of a bike and the company has seen strong sales growth within the domestic market in recent years.
GoPro launched its first high-definition (HD) camera in 2009 and has already sold more than 8.5 million HD cameras since then. Last year alone the company sold roughly 3.8 million cameras, capturing a little less than half of the total camcorder market in the U.S. Brisk sales have catapulted GoPro to the No.1 selling company in this space.
The company’s GoPro Programming – a user-generated platform  – has been a hit with consumers as it has roughly 1.8 million subscribers on YouTube (read: Can IPO ETFs Remain Hot in 2014?).
The company has witnessed a massive surge in revenues and profits over the years. Its profits climbed to new highs last year, shooting up a fabulous 88% to $60 million, as revenues jumped 87% to $986 million.
The company even plans to diversify into the media and hardware manufacturing business, so there are definitely growth opportunities left for this stock in the future.
The Hot and Sizzling IPO Market
The U.S. IPO market has been on fire this year with 143 offerings being priced till June 26, up 59% from the comparable period last year. In fact, this month could see a total of 38 public offerings, the highest in a single month since 32 offerings in October 2004.
In this flurry of IPO activity the Technology sector has raised the most capital ($10 billion) and Healthcare saw the largest number of IPOs. Most of these are unproven companies, yet to earn their first profits and are looking to raise capital from the equity markets to drive growth for drug development or in order to exploit new technologies.
There seems to be no signs of pausing and the pipeline looks both deep and varied.  37 companies have already submitted their IPO filings and there are 135 more companies that wish to go public.
ETFs to Watch
Though the following ETFs don’t presently own any shares of GoPro, the initial success of the company might see its addition into a number of funds in the near future. Below we have highlighted three ETFs which might consider including GoPro in their holdings, or at the very least, should be in focus given the recent IPO boom:
First Trust US IPO Index Fund (FPX)
The product tracks the IPOX-100 U.S. Index, giving exposure to the booming U.S. IPO market. The ETF focuses on 100 largest and most liquid U.S. IPOs. New companies can find a place in the fund’s holding after trading for a minimum of 100 days.
The product holds a basket of 101 stocks with Facebook (10.37%), AbbVie (8.9%) and General Motors (6.06%) taking the top three spots. The product has a nice mix of sectors, with the top four being Consumer Discretionary, Information Technology, Healthcare and Energy.
The product manages an asset base of $483.9 million and has gained 35% in the past one year (read: Profit from the Booming IPO Market with This ETF).
Renaissance IPO ETF (IPO)
Launched last year, the fund too gives exposure to the hot U.S. IPO market. New companies seek inclusion on a ‘fast entry basis’ on the fifth day of trading.
It tracks the Renaissance IPO Index, holding a basket of 63 stocks. Twitter Inc, Zoetis Inc and Workday Inc. occupy the top three spots making 25% of total fund allocation. As far as sector allocation is concerned, Technology dominates the fund, followed by Energy and Healthcare.
The product charges 60 basis points as fees and has returned 4.5% so far this year (read: Track Initial Public Offerings with this New IPO ETF).
iShares North American Tech ETF (IGM)
This technology ETF provides exposure to North American electronics, computer software and hardware, and informational technology companies by holding a basket of 267 stocks.
The fund includes some of the biggest tech players such as Apple, Microsoft, IBM and Google. Sector-wise, Software, IT Services and Internet Software & Services take the top three spots (see all Technology ETFs here).
Being a technology based company and headquartered in California, GoPro could pave its way into the fund, albeit as a very small holding. IGM manages an asset base of $701.4 million and has gained 29% in the past one year.
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