Here is my technical take on GoPro (GPRO). (October 29, 2015)
In this video I want to look at GoPro ( NASDAQ:GPRO ). I was on CNBC after the close. I was on the Closing Bell, which happens after the close, talking about GoPro ( NASDAQ:GPRO ). It was actually kind of cool, they’re doing this more and more, they’re not asking me to bring charts, which I love, because I look at a lot more stuff in making my trading decisions than what the chart looks like. Though, at the end of the day, and at the beginning of the following day, the chart is really what should really dictate whether you act or whether you watch.
So anyway, we were talking about GoPro ( NASDAQ:GPRO ) and this is really kind of an interesting conundrum, and here’s why: I bought some GoPro ( NASDAQ:GPRO ) this morning when the stock was trading down. I really felt, last night, that it would probably hold at at 25.00. We had a covered call going on Option Market Mentor and my suggestion was that you pull your stop, because we had sold the $30.00 calls for about 3.50 or something like that, so it’s turning out, actually, to be a good trade because we were anticipating holding over earnings. Anyway, I don’t what to get too far afield there.
The point was I said, “You know what? Pull your stop. Wait for the stock to stabilize, and it probably will around 25.00 or so, and then buy your call back.” You make about a $3.00 profit on the call, which drops your cost basis in the stock. Then, if or when the stock runs up, and I’m not talking about 25.62, I’m talking about like another 10-15 percent or so, to test the breakdown, then sell those calls against it again. Maybe not the 30’s, maybe the 28’s, 27.50’s or what ever. Just kind of gradually work it like that (that was just kind of an aside).
But my point was this: I’m looking at this and technically just for a trade. I look at this as it’s hit an all-time low on four-times average volume after suckering people in. Somebody got suckered in on twice the average volume yesterday where the stock was up 7 percent so. Somebody thought they knew something and they’re buying a boatload of stock before earnings. Well that didn’t work out too well, did it? So you’ve got like 41 million shares being sold by people who are totally losing money on this “dog”; but I’m sure it looked good on film. So, from a technical standpoint this is actually a really good buy, right here. But from a fundamental standpoint, and this was what I was explaining on CNBC (you never get enough time), from a fundamental aspect, I don’t really think the company’s that great.
The multiple contraction has been quite impressive; I still saw somebody on this morning from some stock house that has a $90.00 price target on GoPro ( NASDAQ:GPRO ). They probably value marijuana stocks too; $90.00 on this thing, good luck with that. But the thing has a market cap that’s fallen by 60 percent from the very high this last time. The reason is, because now their revenues, Oh my gosh! they’re growing at like 43 percent or something like that. But that’s the worst quarter that they’ve had, so their revenue growth has been decelerating. Still growing, but each quarter is successively less growth than the last quarter, compared to a year ago.
So again, when you just look at the headline number, GoPro’s ( NASDAQ:GPRO ) revenue growth was blah blah blah, and then you look at the stock and say, “Okay the market’s rigged. Why is this down so much?” I’m just telling you why it’s down, because even though the headline number, like the unemployment number, might be impressive, it’s totally worthless with respect to what investors look for. They’re looking for ACCELERATING revenue growth, not DECLINING revenue growth. So that, in my view, is the best explanation for why GoPro ( NASDAQ:GPRO ) fell.
With that said, I’ll say it again, I bought it today and I plan on keeping it. I’m telling you exactly where my stop is, at least where it will be based on, $24.00. I bought it for around 25.00 and change, I think like 25.35. If the stocks falls down below 24.00, and I’m actually giving it a little more room than I need to, if it falls lower then I’m just going to close the trade out. But when I see this kind of volume, this looks like a total pukefest here, clearing the way for more upside. Again, their revenues are growing, the company’s growing. It’s just that the growth rate is decelerating. Investors look for accelerating growth rate. THIS IS NOT THAT. So look for a technical bottom. But only be looking at this, in my view, from a technical standpoint, in other words the chart standpoint. We’ve got the holiday season coming up so you’re going to see sales.
But the point is, and you know this, if you own a Hero, if you own one of those GoPro cameras I kind of doubt that you’re looking to upgrade to another one, because there’s not that darn much difference between the two of them. It’s not an aspirational thing like the next iPhone or, “Oh I want to get the new iPad, because it’s a different color.” People strap these things on their bodies, on their helmets, and then go do fun stuff. They’re more interested in the fun stuff than they are whether the touch pad is pressure sensitive or not. So understand exactly what this company is, what their growth prospects are. Then focus on the chart and make your decision based on that chart. I just told you mine. If the stock keeps moving higher and higher and higher, I’m not going to really change my opinion on the fortunes of the company, unless new fundamental data comes in. But I will be happily long this stock.
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