I know that I will likely tick off a few fans when I say that GoPro Inc (NASDAQ:GPRO) is a camera company, pure and simple. It took Wall Street a while to figure it out but not before they chased unicorns for a while.
Unfortunately for a lot of retail investors, this realization came too late, as buyers ran GPRO stock up to $90 before it collapsed. Now it languishes in a new single-digit zip code.
The fall from grace came in bursts and the first started in the fall of 2014 which resulted in a 60% drop. Then after a temporary bounce came another wave lower, 80% this time, leaving it under $10. The third wave of selling came after a bounce in October of 2016 and sent it once again into single digits.
I mention this to highlight the fact that it appears that GPRO stock doesn’t perform well late in the year and that could indicate bad execution around the holiday. I am not a retail expert, but I suspect that product mix, pricing or availability caused disappointments around the all-important holidays.
Click to Enlarge The last major blow came this March when GoPro stock was temporarily gutted partly due to the market-wide dip but also exacerbated by downgrades. The bulls finally managed to find footing, but not before dipping to $7 per share.
In addition, the success of the Snap Inc (NYSE:SNAP) initial public offering undoubtedly siphoned a lot of the speculative money that would have gone to GPRO.
The downgrades now are ironic since most experts once labeled GPRO as the “a YouTube killer” but surely Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) management wasn’t too worried then.
GPRO Stock Trade Idea
Today’s thesis is simple as I don’t have a complicated outlook around GPRO drones or deeper forays into video. I am simply saying that GPRO will not go out of business soon and that it has already seen the lows for the year.
The GoPro Bet: Sell the GPRO Oct $7 put and collect 70 cents per contract. Here I have a 70% statistical chance of having price stay above my strike so I can retain maximum gains. Otherwise, I would accrue losses below $6.30 per share. I chose the October contract so that I don’t have to sit long into a stock that doesn’t perform well late in the year. For temporary insurance against the crash scenario, I could also buy cheap sacrifice June puts in GPRO stock.
This is pretty much a literal bet, so I only risk what I am willing to lose. I don’t sell naked puts unless I am willing and able to own the shares — else, I should use spreads instead.
E-mail sellspreads@gmail.com with questions or join me to learn more about options in a personal 1on1 webinar here. Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.
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