GoPro Inc (NASDAQ:GPRO) jumped more than 3% on Tuesday as the action camera maker gears up for a busy holiday shopping season. The company expects strong demand for its latest high-end Hero 4, which costs $399 for Silver Edition and $499 for Black Edition. The rally in its stock was quite surprising as the company announced on Monday its plans to sell about 10 million shares in a secondary offering.
GoPro defies logic
GoPro founder Nick Woodman will be selling 4.08 million shares. The company itself will put 1.29 million new shares up for sale. Other major sellers include Riverwood Capital, which is selling 1.63 million shares, and Foxteq Holdings, which plans to sell one million shares. Other senior company executives are also participating in the stake sale. Based on the stock’s closing price on Tuesday, the follow-on offering will be worth more than $840 million.
Normally, when CEO and other senior executives of a company unload their stakes in a company, investors see it as a red flag. That’s not the case with GoPro. Wedbush Securities analyst Michael Pachter said that GoPro is rising when it should retreat. The enthusiasm around the stock is because it is on “every retailer’s hot product” list for the holiday shopping season.
GoPro supplier Ambarella also jumps
Anticipation for strong holiday sales have also fueled the Ambarella Inc. (NASDAQ:AMBA) stock. Ambarella designs video-capturing chips used in GoPro cameras. Its shares surged as much as 8% on Tuesday, and inched up another 2% in pre-market trading Wednesday. GoPro went public in June at the IPO price of $24. The stock is trading 255% above the IPO price.
The San Mateo-based company said at its third-quarter earnings call that initial demand for its Hero 4 camera had been very strong. For the current quarter, which includes the holiday season, analysts polled by FactSet forecast $574 million in sales and $0.69 per share in earnings. By comparison, the company earned 12 cents per share on revenue of $280 million in the September quarter.