GoPro Inc: Upbeat Holiday Sales Are Already Priced In

Updated on

GoPro Inc (NASDAQ:GPRO) has rallied after falling to $64 on Oct.27. Investors were expecting strong holiday sales for its latest Hero4 action camera. Initial sales have been strong, suggesting that the company is on track for a record-breaking quarter. However, Parke Shall of Orange Peel Investments says that the holiday sales are already priced in.

GoPro makes ‘commodity products’

Last week, GoPro supplier Ambarella Inc (NASDAQ:AMBA)’s third-quarter results crushed the Wall Street estimates. Ambarella also issued upbeat guidance for the current quarter. However, Seeking Alpha contributor Seth Golden says that holiday sales don’t look promising. ShopperTrak found that foot traffic to retail stores increased during the Thanksgiving weekend sales. But data from the National Retail Federation shows that Thanksgiving weekend sales declined at double-digit rate.

That means retailers are making less even though foot traffic increased and online sales surged. Parke Shall says that GoPro is a company that makes “commodity products.” So, it’s subject to fierce competition in the future. Though the San Mateo-based company isn’t a retail store itself, it is subject to the “same euphoria” as the retail sector. Shall says the recent rally in the stock could have been a “product of wishful thinking” heading into the crucial holiday season.

GoPro has hit the euphoria saturation

Further, GoPro operates in a sector will few barriers to entry. Shall says the stock has hit the euphoria saturation. Latest data show that the short interest in GoPro stock increased from 9.61 million shares on Oct.31 to 11.19 million on Nov.14. That’s a 16.4% increase. Based on the average daily trading volume of 7.82 million shares, it will take short sellers 1.43 days to cover their positions.

The action camera maker is also planning to enter the consumer drone market next year, as aerial photography continues to gain momentum. Notably, there is no strong brand in the consumer drone market, which may give GoPro the first mover advantage. It will also help the company diversify its product offerings as competition heats up in the action camera market.

GoPro shares inched up 0.10% to $72.25 in pre-market trading Monday.

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!