Hype quickly turned to horror for investors in action camera maker GoPro Inc (GPRO).
The stock nearly quadrupled its IPO price in 2014 — the same year it debuted — then collapsed for a loss of 91% into its February low as the Hero Sessions camera was a flop.
What happened?
People realized that their lives weren’t as extreme (and Facebook worthy) as they believed, and the company’s delusions of being an extreme sports media channel fell flat. Shares of supplier Ambarella Inc (AMBA), which makes high definition, 4K vision systems, dropped more than 60% in sympathy.
Since then, shares have rallied by about a third on hopes the worst is over. But is it?
GPRO Stock’s Rocky Road Ahead
Technically, the stock is trying to lift off of support from its 50-day moving average — a level it has largely stayed above since early March. Much depends on the upcoming earnings report on April 28 after the close. Analysts are looking for a loss of 59 cents per share on revenues of $169.15 million.
Supplier AMBA was recently upgraded to “Buy” by analysts at Morgan Stanley, noting recent headwinds have bottomed. After recently reporting results, analysts have turned more constructive on Ambarella on a drawdown of sports wearables inventories. GPRO is working to clear excess stock as the industry looks ahead to the release of the Hero 5 camera and the upcoming Karma drone.
But with DJI so dominant in the space with its Phantom products — as newcomer 3D Robotics is learning the hard way — it’s doubtful the Karma will shake things up unless it deploys a margin-squeezing low price point.
Another possible catalyst that has been making the rounds is that GPRO might be a possible takeover target for the likes of Sony Corp (ADR) (SNE) or Under Armour Inc (UA). It would be a non-core move by UA. And SNE has aggressively ramped up its own action camera efforts.
For GPRO, everything depends on a successful rollout of new products. Until then, resistance near $14 should contain any short-term rallies.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
