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) -- 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.

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?

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