GoPro shares surged 13% last month after the company reported its second quarter earnings at the end of July. The earnings beat and management’s claim that the company will likely return to profitability by the end of the year have investors demanding GoPro stock once again, says Chris Neiger of The Motley Fool.GoPro, IFA 2015 by Janitors, Flickr
Positive signs for GoPro investors
Anyone tracking GoPro over the past year has probably noticed that it was down more than 40% year-to-date before the second quarter results were declared.
“So nearly any positive news in the quarter would have turned investor sentiments around,” says Neiger.
Analysts were anticipating a loss of 58 cents per share on $194.3 million in sales; however, the tech company delivered a loss of 52 cents per share on $221 million. Of course a loss is not something investors get excited about, but it was less than what was expected by analysts, so it was a win for the compmany’s stock, which has not been doing well over the past few months, notes Neiger. Also comments from GoPro CEO Nicholas Woodman helped with the surge, he added.
In a press release, Woodman said, “HERO5 and Karma will contribute to the largest introduction of products in our history, all in time for what we believe will be GoPro’s most exciting fourth quarter, ever — a quarter where we expect to return to profitability.”
Apparently, the near promise of profitability by the fourth quarter also helped accelerate the stock last month. However, investors will have to wait a few months to see if it all goes as Woodman suggests. But according to Neiger, there are a few things investors can be optimistic about, like the 14% increase in the ASP in the second quarter and the product sell-through surpassing its sell-in by more than 50%, which suggests that the company has been able to move products promptly.
Five reasons to bet against the stock
A fact that can’t be ignored is that over the past 12 months, GoPro shares have fallen more than 60%, and many believe the stock could decline even further. About 33% of the action camera maker’s outstanding shares were being sold short as of August 24, making it the 16th most-shorted stock on the market.
Though heavy short interest is no surety of a bearish case against a stock, a separate report from Motley by Leo Sun lists five reasons to bet against the stock: slowing sales growth, contracting margins, the Hero 5 probably isn’t a big upgrade, the Karma could crash, and insiders hate the stock.
As it appears, there is no clear consensus on GoPro’s stock. So the best advice for investors is to watch and wait and then take positions accordingly.