GoPro Inc (NASDAQ:GPRO) shares were down yesterday following the Sell rating issued by the Vertical Group analysts. The independent research firm initiated coverage on the stock with Sell rating after which the shares slumped during the early trading on the Nasdaq.
Is GoPro overvalued?
Yesterday, during early trading hours, a decline of 4% was recorded in GoPro shares, which did not sustain for long, and the shares went up, and within the first two hours of normal trading were down by just 2%. Vertical Group analyst Robert Lopez gave GoPro a price target of $28.50, which is way below the current trading price of around $42.40. Setting a target price that is much lower made investors skeptical of the future growth and profitability prospects.
Considering the fact that GoPro, a company that deals in consumer electronics, is trading at 56 times its earnings next year is highly overpriced and hence the investors are advised to proceed with caution as they might get disappointed with the earnings later, believe many analysts.
GoPro has very few sell-side firms that have initiated research on it, and Dougherty & Co. is one of those. The research firm gave a Buy rating with a price target at $28, just before the company’s IPO on June 26.
Coverage on GoPro, Inc.’s stock has not been initiated yet by its underwriters for IPO, which includes some big names like Morgan Stanley and Barclays owing to the barriers put up by certain regulators.
Short sellers expecting correction
Eligibility for trading was gained by GoPro options on the 7th of July, but the trading of GoPro options has not been as per the expectations, reported the Wall Street Journal, a few days back. Almost all the share offered by GoPro for borrowing has been shorted now, according to few reports. This indicates that a major correction is expected in the shares of the camera maker.
GoPro shares were priced at $24 at the time of IPO, and are up over 70% since. In the first five days of trading, GoPro witnessed an average daily trading volume of around 38 million, which is the fifth highest among the 5,000 U.S.-based companies in the same period. For the year ending March 2014, the camera maker earned $49 million in profits on revenues of $966.