GoPro Inc (NASDAQ:GPRO) stock was soaring on Wednesday, with shares trading as much as 12% higher after a blowout first quarter that easily topped Wall Street consensus forecasts.
With GPRO stock now trading above $52 a share, it’s still far, far beneath all-time highs around $98 that the stock hit in October. But if the wearable camera company keeps doing what it’s doing, GPRO stock could be flirting with those levels again sometime soon.
It sounds crazy, I know. But allow me to outline the uber bullish case for GPRO stock.
GoPro Q1 Earnings
GoPro shareholders have watched in dismay in 2015 as the GPRO stock price took a 25% haircut through yesterday’s close. Meanwhile, Ambarella Inc (NASDAQ:AMBA) — the company that supplies GoPro with its low-power, high-quality video chips — was soaring, up 42% year-to-date.
Could GPRO regain similar success? It looks likelier after Tuesday’s first-quarter results, which were stellar.
GPRO stock immediately shot higher in after-hours trading on Tuesday afternoon after GoPro earnings clocked in at 24 cents per share on an adjusted basis, clobbering consensus estimates for 18 cents per share. GPRO revenue shot 54% higher year-over-year as well to $363.1 million, clearing consensus expectations by a cool $20 million.
If GoPro keeps having quarters like last quarter, and keeps forecasting quarters like the current quarter, GPRO stock shouldn’t have a problem reclaiming its spot as one of Wall Street’s momentum darlings. GPRO expects revenue between $380 million and $400 million and EPS between 24 and 26 cents in the second quarter.
In short, GoPro absolutely exceeded the hopes of Wall Street analysts, who logged estimates of $333.7 million in revenue and EPS of 16 cents for Q2.
Perhaps they too were brainwashed into becoming GPRO bears on fears that Apple Inc. (NASDAQ:AAPL) could soon elbow in on GoPro’s territory and destroy it. These ridiculous fears began back in January when the tech blog Patently Apple published a story entitled “Apple Granted a Patent for a Superior GoPro-like Camera System.”
As I pointed out at the time, Apple’s patent posed little, if any, threat to GPRO:
“This patent is not, as GoPro’s plunging stock price would have you believe, intended as a GoPro-killer. This patent is for a way of interfacing between a camera and a battery-operated ‘remote control module.'”
In other words, the patent was for a feature on the Apple Watch (or in patent terminology, the “remote control module.”)
So, for months now, GPRO has been facing an uphill battle against uninformed investors fearful that AAPL will steal GoPro’s mojo.
Today, a number of analysts changed their minds. Raymond James upgraded GPRO to an “outperform” rating, Piper Jaffray boosted its GoPro price target by $11 per share, Northland Capital raised its PT by $6 a share, and Dougherty & Company also hiked its price target by some 18%.
GPRO also announced the acquisition of Kolor, a virtual reality software company, igniting speculation that the company would develop a camera that can record 360-degree video. With some of Silicon Valley’s biggest names — Facebook Inc (NASDAQ:FB) and Microsoft Corporation (NASDAQ:MSFT) come to mind — investing in virtual reality, GoPro is on the cutting edge of technology.
There’s no telling what we’ll see from GoPro next. But I can tell you that I expect GPRO stock to do quite a lot in the next few years.
As of this writing, John Divine was long shares of AAPL stock and long Jan 2016 AMBA $25 call options. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
