Not Having A Good Holiday Season?
Piper Jaffray analyst Erinn Murphy reiterated her bearish stance on GoPro stock with an underweight rating and a price target of $8, a 10% downside from the current price. The main reason for the continued bearish stance was the lower than expected holiday season sales. According to Murphy (2):
“Our weekly Amazon tracking indicates the average pricing basket of GoPro products has seen a sequential quarterly decline from $282 in Q3 to $265 in Q4.”. “This Holiday season has not gone as planned from our perspective,”.
GoPro Inc (NASDAQ:GPRO) also announced that the company will incur extra $7 million in severance package related to the closing down of the media division. The closing down of the media division is an integral part of GoPro’s plans to return to profitability. GoPro is already incurring $24-$33 million in restructuring charges. According to GoPro, the restructuring will allow it to reduce its operating expenses to $650 million ($735 million in GAAP) helping it to become Non-GAAP profitable next year. (Also Read: Can GoPro Stock Bounce Back After Its Bad Karma?).
It is not only revenues and income where GoPro is performing badly. A look at the chart below shows that even its cash position is deteriorating. The company is burning millions of dollars in operations.
The Bears Are Not Going Anywhere
A look at GoPro’s short interest data tells you that there are a lot of investors who don’t believe in GoPro’s turnaround story and are betting against the stock. In the latest reporting period, the total shorted shares came in at 32.8 million or a massive 34% of the float. The declining volume has pushed the days to cover at 8 days. While this shows the confidence of the bears, one must be careful before further shorting the stock, as a strong positive catalyst such as a heavy earnings beat or a bullish outlook could force the shorts to take cover, resulting in a massive short squeeze. However, any strong upside move in the stock is unlikely at the moment.
GoPro Stock Continues To Remain A Risky Bet
This has been another bad year for GoPro investors. The stock tanked more than 50%. The company continues to lose money and more importantly was forced to recall the Karma drone. With a drastic decline in the stock and strong bearish sentiment surrounding the stock, it is not surprising that the short interest is very high. While the consensus price target of $10 indicates 13% upside, GoPro stock continues to be a very risky bet going into 2017.
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