EARNINGS ALERT: Does This Spell the End for GoPro?
GoPro Inc (NASDAQ:GPRO) has become the poster child for dud unicorns. The downfall in GPRO stock began in the summer of 2015 and has perpetuated this year. Will the stock find a bottom ahead of GoPro’s fourth-quarter 2015 results? Allow me to answer that…
I’m seeing a bottom in sight and a reversal in the price hereafter. Let me explain why.
GoPro reports its fourth-quarter results today after the bell. And holders of GPRO stock have never been more nervous.
Now, GoPro already gave us a heads-up on its fourth quarter. The company cut its guidance earlier this month, after which a slew of analyst downgrades followed. Since then the stock has cratered more than 40%, making it the worst-performing tech stock of the year.
But there’s something peculiar about the company’s revised guidance. GoPro had previously guided revenue to fall in the range of $500 million to $550 million. But on its revised outlook, GoPro took down the guidance to a much lower $435 million. It’s interesting to note that GoPro has not given a range this time, but one rounded-off figure.
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Simply put, GoPro is not keeping it vague anymore. This could be the number!
It won’t be all that wild to assume that the company has guided lower ahead of earnings for one reason—to beat that number! If this were true, the stock will likely pop after earnings. This will send the bears running to cover their positions.
Notice how GoPro has seen a significant and consistent hike in its short interest. More than 44% of its outstanding shares are currently short. In fact, the short interest is now at all-time highs.
With nearly half of its float short, it’s safe to expect a short squeeze at this point.
Plus, one thing seems evident from its price chart below. The stock appears to have found support at current lows. If GoPro manages to beat the downward revised estimates, the stock could bounce back.
Chart courtesy of www.StockCharts.com
Remember: this quarter has been the toughest for GoPro. The mispricing on the “Hero 4 Session” remains the biggest reason behind the softer guidance. Also, there’s no other way to put it: CEO Nick Woodman has failed his stockholders. He promised to create an ecosystem for the product, but he could not deliver on that promise.
While I’ve been pro-GoPro, I’ve also been critical of its managerial problems. Since nothing concrete has been done to change that, I understand investors’ skepticism at this point. However, it’s premature to call an end on GoPro stock.
The Bottom Line on GPRO Stock
GoPro may still have a chance to reclaim its lost glory. Some future product launches are keeping hope alive. All eyes are now set on the impending launch of GoPro’s commercial drone camera. Plus, the next lineup of its flagship cameras (the “Hero 5 Session”), this time with 8K video, is also expected to be a game-changer in the industry. The two products will likely help recoup this quarter’s losses.
The rebound in GPRO stock may not be huge in the short-term. It might, however, positively surprise in the long-term. To put it simply, one would be a fool to have held GoPro shares so long, only to sell them on fear before it’s time.