GoPro Stock Could Surprise the Bears Next Week
As counterintuitive as it may seem, the highly bearish sentiment surrounding GoPro, Inc. (NASDAQ:GPRO) may be about to turn. But the company might silence its critics, which could lead to a big rally in the GPRO stock price.
Sound outlandish? Many would agree that the rugged camera manufacturer will continue to plunge lower and that the GPRO stock price could very well break through its initial public offering price set last year. But others have pointed at the company’s robust financial health and upcoming products to underline that it is a significantly undervalued stock with strong upside potential. This will surely upset the naysayers.
The analysts over at JPMorgan would certainly disagree with the first group, as their latest report on October 21st hints at a possible upswing in the GoPro stock price forecast. (Source: “GoPro Inc (GPRO) Stock To Rebound After 3Q Earnings Call: JP Morgan,” Bidnessetc, October 21, 2015.) Considering that GPRO stock has fallen by more than 50% since the release of the company’s second-quarter 2015 report, there is no end to the skepticism, however.
Here’s Why I’m Bullish on GoPro Stock Next Week
GoPro’s latest efforts at revitalizing slumping sales numbers have met a half-hearted response from consumers, leading to price reductions as the company’s management seeks to buoy sales volumes and get rid of existing products before the holiday shopping season begins. (Source: “GoPro Earnings Preview: The Running Of The Bulls,” ValueWalk, October 21, 2015.)
Wall Street analysts remain unconvinced however, as GoPro has announced it likely won’t even be releasing refreshed versions of either the Silver or Black camera models in time for the season.
GoPro stock still sits in a favored short position, with approximately 29% of the overall float being short-sold. Furthermore, GPRO shares are trading at a price-to-earnings ratio which is still lower than that of its competitors and peers, despite management’s third-quarter 2015 guidance staying at around a projected 55% in growth, year-over-year.
But there are also some very promising product catalysts on the horizon, such as the GoPro drone set for a tentative release in early 2016. (Source: “Could a GoPro Drone Be On The Way?” SmallBizTrends, September 28, 2015.) But there are also talks of integrating virtual reality into its future cameras, as well as solid growth in GoPro’s media and editing platforms.
The reality is that basing a bearish outlook on GoPro stock on declining sales figures is not the best strategy, and ignores the robust growth and financial health of the company, as well as its exciting new product lineup. Wall Street investors and analysts can’t see the forest because the trees are in the way, as they are avoiding some bullish indicators for the GPRO stock price. All signs point towards GoPro’s growth trajectory going steadily up, but we’ll have a much clearer picture after next week.
Various analysts have estimated that Gopro earnings per share will be about $0.32, with revenue in the range of $443 million in the third quarter of 2015. GoPro’s management has released guidance for Q32015 earnings to be $0.29-$0.32 per share, and $430 to $445 million in revenue. (Source: “GoPro Earnings Preview: The Running Of The Bulls,” ValueWalk, October 21, 2015.)
Overall sales volumes are forecasted to be in the range of $1.65 million, which represents a 51% increase; with revenues soaring 59% compared to 2014. Several analysts have reported that there could be a significant upside to their forecasts, as the reduced prices of models such as the GoPro HERO and LCD cameras could give substantial impetus to sales.
Here’s the Bottom Line on GoPro Stock
You can expect earnings per share to rise sharply for GoPro in the fourth quarter of 2015 to about $0.85, in line with the seasonal surge in sales. This will likely result in overall sales revenue of about $688 to $748 million by the end of December. The disparity in estimates is quite interesting, underlining that while GoPro may be down in terms of the GPRO stock price, the company has significant room to surprise investors and analysts alike.
GoPro certainly has the financial health, market cap, and ambition to achieve the kind of upset which will have some investors wondering why they didn’t take the opportunity to invest in GPRO when it was sitting at a bottom.