LEXINGTON, Ky. (TheStreet) -- After more than a two-month, 35% drubbing, shares of GoPro (GPRO) finally caught a break on Friday, in the form of an upgrade from JP Morgan (JPM) . The investment bank's bullish thesis on GoPro may even be on target, for a while. Sooner rather than later, though, GPRO shares are apt to stall due to a combination of a frothy valuation and waning demand for its hands-free action cameras. That deterioration in demand closely mirrors the disappointing sales growth seen with the Apple (AAPL) iPad, and for much the same reason.
Flooding the Market
Much of the pullback from GoPro of late has been attributed to the impending end of a lockup period for a huge number of shares of GPRO. On Dec. 23, many of the original investors will be allowed to sell roughly 15 million shares of the stock, which could increase the size of the current float by more than 40%. Not interested in risking the bearish impact that a sudden surge in supply could have on the stock's price, traders are collectively shedding it now. That selling could have (ironically) already factored in the downside of the lockup's end.
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It's after the dust settles following Dec. 23 when things could get bullish, albeit it for a limited time.
Strong Demand ... for Now
Reports of strong demand for GoPro cameras during this holiday shopping season are plausible. Some sellouts (particularly of the Hero 3+ Silver) have been observed, jibing with comments from and about the company that holiday demand was solid. This should spawn equally solid fourth-quarter numbers when the company reports them in late January. As of the last look, analysts collectively expect a profit of 69 cents per share on $568 million in sales. Those are figures that could excite the market, though odds are good any earnings-based buying would start to materialize before the official earnings announcement.