This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

GoPro Stock Is Still Attractive -- if You're a Short, That Is

NEW YORK (TheStreet) -- In a span of a couple of months, GoPro (GPRO - Get Report) -- once heralded as 2014's best IPO -- has become the year's best short candidate. No one could have pictured that.

The stock closed Thursday at $47.97, up 3.57%. But shares are declining nearly 12% so far this morning (down to the $42 range as of 11 a.m.) following GoPro's earnings results, which delivered an operating loss of $16.7 million.

Keep in mind that a 10% decline is peanuts when considering that as long as GoPro stock stays above $40, shares are still up more than 66% from GoPro's high-end initial offering of $24 per share.

Must Read: Warren Buffett's Top 10 Dividend Stocks

Thursday's GoPro earnings were yet another reminder of how IPO exuberance remains one of the pitfalls of the stock market.

And while the stock may seem attractive after this decline, it's not. Because even at this seemingly more attractive valuation, the shares still command roughly 30 times this year's EBITDA, which doesn't make sense.

As I've told you on two other occasions, GoPro is a solid short until the stock falls closer to the $30 range. The way I see it, until GoPro's insider-sales lockup expiration comes, which I'm projecting to be on Dec. 26, there is still 30% downside risk to these shares.

Twitter (TWTR) is the most recent example. On May 6, the day of its lockup expiration, almost 135 million shares were traded. Twitter had only averaged a little over 13 million shares traded per day. That day the stock closed at $31.85, falling 18%. Early buyers couldn't wait to cash out.

As with Twitter, there are plenty of venture capitalists and mezzanine investors with GoPro stock burnings holes their pockets. December can't come fast enough. Value hunters who are thinking of buying today have to explain what's going to send the stock higher from here. And if Thursday's earnings results were any indication, this company is far from picture-perfect.

Despite claims about how GoPro will turn itself into a media power, this is still an electronics company. Until the numbers say otherwise, astute investors should make this distinction.

Accordingly, it only makes sense to evaluate GoPro as we would other electronic companies like Sony (SNE), JVC (JVCZF) and Samsung (SSNLF). But here's the problem: electronics companies operate in a commodity business. The only guarantee within the industry is that price of electronics will drop over time.

That's what's hurting Sony.

There has been no company, outside of Apple (AAPL), that has proven capable to maintaining the sort of profit margins necessary to consistently grow the bottom line.

So what does this mean for GoPro?

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GPRO $11.63 -4.90%
AAPL $95.30 1.80%
FB $117.56 -0.85%
GOOG $694.86 -0.48%
TSLA $234.18 -3.20%


Chart of I:DJI
DOW 17,767.03 -124.13 -0.69%
S&P 500 2,064.74 -16.69 -0.80%
NASDAQ 4,776.10 -41.4940 -0.86%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs