GoPro Inc (NASDAQ:GPRO) stock has been off to the races since its initial public offering, and it doesn’t show any signs of slowing down. Unsurprisingly, short interest in the digital camera maker has skyrocketed since June, climbing from nearly 3,000 shares being sold short at the end of June to more than 8.4 million shares being sold short as of the middle of September.
GoPro is overvalued, says Kerrisdale
It turns out that Kerrisdale Capital is among those shorting GoPro. The firm reportedly issued a short thesis on the camera maker today.
The Fly on the Wall reportedly obtained a copy of Kerrisdale’s short thesis on GoPro. The firm said that not only is the company’s stock overvalued, but also its media strategy is unlikely to “bear fruit,” reports the website. The firm also believes that sales of GoPro’s cameras probably will not see exponential growth
Tiger Legatus Master Fund was up 0.1% net for the second quarter, compared to the MSCI World Index's 7.9% return and the S&P 500's 8.5% gain. For the first half of the year, Tiger Legatus is up 9%, while the MSCI World Index has gained 13.3%, and the S&P has returned 15.3%. Q2 2021 hedge Read More
GoPro can’t be a media company
According to the website, Kerrisdale noted in its short report that much of the value investors have ascribed to GoPro Inc (NASDAQ:GPRO)’s shares comes from the idea that the company can transform itself into a media company. The camera maker set forth this plan recently, and investors have simply gobbled it up.
The firm notes that GoPro does have millions of subscribers for its YouTube channel and that its videos have hundreds of millions of views. However, Kerrisdale management doesn’t think the company will ever get a significant amount of revenue from either YouTube or even its own cable TV network. The report calls this idea “ludicrous,” further stating that GoPro doesn’t own any media and isn’t a media company.
GoPro’s cameras like Apple’s iPod?
Recently GoPro unveiled the Hero 4 additions to its camera lineup, but Kerrisdale management is apparently skeptical on those new products as well. They note that the company has a lot of competition, and some investors have even compared its cameras to Apple Inc. (NASDAQ:AAPL)’s iPod. However, they point out that GoPro Inc (NASDAQ:GPRO)’s cameras do not have their own ecosystem like Apple does. They also don’t think GoPro’s offerings are “materially superior” to the offerings of its competitors, according to The Fly On The Wall.
They point out that the iPod appeals to anyone who plays music and could fork over $100 to $200 for one. However, GoPro’s cameras are priced between $300 and $500 and are only for those who like to take action video while they’re doing something. As a result, the iPod had a much larger addressable market when it came out.
Kerrisdale’s report also states that they don’t think GoPro will update its camera frequently and points out that the company’s niche market already shows signs of saturation.
Citron also recommends GoPro short
Kerrisdale isn’t the only firm recommending a short position on GoPro Inc (NASDAQ:GPRO). This week analysts at Citron Research said they see an opportunity for short-sellers to take profits because most analysts at other firms are raising their price targets based on stock price movement rather than fundamentals.