Amid all the focus on the U.S. elections, many investors seem to have forgotten their analysis for the near-term, seasonal tendencies of stocks into year’s end. More often than not, a year-end rally in U.S. stocks comes to fruition, and retailer stocks and/or consumer electronics manufacturers tend to participate meaningfully in this lift. Take GoPro Inc (NASDAQ:GPRO), for instance. Despite lousy year-to-date performance, GoPro stock might actually be worth watching for a year-end surprise.
GPRO stock holders have been miserable for most of the past two years. Shares currently are about 90% off their 2014 all-time highs as the initial excitement of a camera on a stick began to wear off.
As such, the clear trend in GoPro stock remains lower. And any bets for a more sustainable turnaround to the upside are simply premature.
In September, GoPro released new camera products as well as its much-awaited Karma drone. However, the company just announced that it’s recalling all Karma drones, as they could lose power in mid-flight. This recall is taking place just as customers began receiving these drones — and ahead of the busy holiday shopping season. This is a major setback for GPRO, as the company was hoping for (and frankly, relying on) a big holiday sales season to get things turned around.
A proprietary survey of mine with potential GoPro customers revealed that the new Hero5 and Hero5 Session are high on their Christmas shopping lists. If I juxtapose this with the price action on the GoPro stock chart, I see hope for a potential rally into year’s end.
GoPro Stock Charts
For perspective, let’s note that through the multiyear lens, GPRO stock remains in a vicious downtrend. Thus, until a change of trend takes hold, GoPro shares remain dead money.
However, while the downtrend is clear, so too is the fact that GPRO has largely been stuck in a sideways trading range since early 2016. So while GoPro stock is far from bullishly tilted, it also has failed to break lower since January.
On the daily chart, we see that after a nice rally from May into October — the latter part of which was driven by hopes around the new product lineup — this has all been reversed in a matter of weeks. GoPro stock is now trading at levels last seen June, also at the lower end of the year-to-date sideways range.
If we look even closer, however, we also see that after gapping lower on Wednesday following the Karma recall news, GPRO stock managed to rally back intraday, closing well off the day’s lows and thus also holding the lows from last Friday.
Part of the intraday “rally” in the stock could indeed have been attributed to the broader market post-election rally. So in my eyes, it’s too early to make a new bullish call on GoPro stock — even for a trade.
However, the longer the stock manages to hold near or above the year-to-date lows the better the odds of a bounce attempt into year-end. Any strong bullish reversal from here, particularly a daily close back above the $11 area could set up long-side trades for a move back toward $13.50 as a first upside target and as a mean-reversion trade.
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