GoPro stock has been a recipient of heavy short interest in the first two weeks of February. Though the stock is down more than 28% year to date, short sellers expect it to sink further. According to Nasdaq, 19.279 million shares of the company were held short as of February 13, a 27.6% increase from 15.11 million shares on January 30.
Any positive news could trigger a short squeeze
By comparison, only 9.6 million shares of GoPro stock were sold short as of October 31, 2014. That means short interest has more than doubled in less than four months. Based on the average daily trading volume of 8.32 million shares, it would take short sellers 2.31 days to close their positions. Any positive news from GoPro could trigger a massive short squeeze.
Separately, GoPro director Edward Gilhuly revealed in an SEC filing that he offloaded 1,000,000 shares of the stock in an open market transaction dated February 20. The shares were sold at an average price of $46.19 for a total value of $46.19 million. A lockup on 76 million GoPro shares expired on February 17, allowing early investors and insiders to sell their holdings. Following the lockup expiration, independent director Michael Marks sold 5 million shares at $46.56 apiece for a total transaction value of $232.8 million.
GoPro at $150 or $14 in four years?
On Monday, Morgan Stanley analyst James Faucette initiated coverage on GoPro stock with Equal-weight rating and $57 price objective. Morgan Stanley said the San Mateo-based company’s biggest challenge was software development. Faucette said GoPro has to beat the giant rivals in the development of video-editing software to keep growing in the long run.
Faucette outlined two scenarios that, in four years, could lead GoPro stock to as high as $150 or as low as $14. Video editing software will undergo a major overhaul in the next four years. If GoPro successfully makes big strides, it has a lot of upside. But the company faces stiff competition in video editing software development from Adobe Systems and Apple. If these rivals beat GoPro, it will commoditize the hardware business, bringing the stock down to around $14.