GoPro (GPRO) Stock Further Declines Amid Short-Selling

GoPro (GPRO) stock fell below its IPO price for the first time yesterday, and continues to decline today amid short-selling.
By Rachel Graf ,

NEW YORK (TheStreet) -- GoPro (GPRO) - Get Report stock is slumping by 7.69% to $21.37 in late morning trading on Friday, with short sellers largely to blame for the stock's decline.

For the year ended November 1, short interest in GoPro shares quadrupled to 33.2 million from 8.2 million, MarketWatch reports.

Additionally, GoPro was named the top "hot stock" for shorts for a second consecutive week on Wednesday by Sungard Astec Analytics, according to MarketWatch.

Short interest in a stock indicates that investors are betting that it will retreat further, so they can profit when they later buy back stock at a lower price.

On Thursday, GoPro stock fell by 7.8% to dip below its IPO price for the first time.

The stock is down 72% for the past year, though the S&P 500 has been flat, MarketWatch adds. In the past three months alone, shares of the company have fallen 60%.

Given the recent activity surrounding the stock, short sellers likely believe the stock will continue to trade lower. 

"The stock can't get out of its own way," Michael Pachter, an analyst at Wedbush Securities, told MarketWatch. "People absolutely detest [it]."

Separately, TheStreet Ratings team rates GOPRO INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate GOPRO INC (GPRO) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • GPRO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 67.31%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • Net operating cash flow has significantly decreased to $4.62 million or 90.16% when compared to the same quarter last year. Despite a decrease in cash flow of 90.16%, GOPRO INC is still significantly exceeding the industry average of -144.79%.
  • 48.51% is the gross profit margin for GOPRO INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.69% trails the industry average.
  • GPRO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, GPRO has a quick ratio of 1.83, which demonstrates the ability of the company to cover short-term liquidity needs.
  • GOPRO INC has improved earnings per share by 30.0% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.25 versus $0.77).
  • You can view the full analysis from the report here: GPRO

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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