It is critical for investors to see GoPro management follow through with what it promises.
The stock of GoPro has rocketed after it was announced that it would be re-authorizing its share buyback authorization following last year’s purchase of $40 million worth of shares by the maker of high-definition action cameras. By 11:11 a.m. ET, the stock was up 5.4%.
What’s The Next Adventure?
According to the company’s board of directors, GoPro will spend $100 million in 2022 to repurchase cheap shares at attractive prices.
This is at a time when they are at an all-time low. The stock price of GoPro was down 54% at one point last year from its price at the beginning of the year at one point in time.
Last year, GoPro spent $40 million on share buybacks as part of its commitment to give shareholders a return on their investment. Management continues to make the same bets as it did in the past despite its share price still being down by 44% from 2022.
Share buyback authorization has been extended by $100 million by the company today. GoPro does not have to complete the buyback by a certain deadline, nor is the $100 million guaranteed to be spent.
Although this was the case, the company stated that it had invested $5 million more this year in buybacks than last.
Anything Else?
The implied belief by management that GoPro shares are undervalued, and cheap enough to buy, appears to be encouraging investors, who are buying right along with management.
Management says it plans to pay for its buybacks with cash generated from operations. The alternative to funding their purchases by drawing down their bank accounts or getting into debt.
Considering these facts, it’s worth noting that GoPro generated plenty of operating cash flow last year, $117 million. S&P Global Market Intelligence predicts the company will generate another $111 million this year.
The buybacks can continue for quite some time with all that cash. In addition, investors can look forward to plenty of buybacks.