Once a darling of Wall Street, GoPro Inc (NASDAQ:GPRO) has turned into an ugly duckling. The troubled action camera company is set to report quarterly earnings after the bell on the Thursday.
GoPro is reporting against the backdrop of increased competition from Garmin Ltd. (NASDAQ:GRMN), a company which has been doing really well lately in the action sports markets GoPro has traditionally dominated. Consequently, GoPro stock looks like a sell into the earnings report.
Although I love to play the contrarian, that won’t be the case here. If it looks like a duck, swims like a duck and quacks like a duck, then it probably is a duck
Unfortunately for GPRO bulls, GoPro stock is nothing more than a dead duck.
GoPro Didn’t Have a Great Quarter
My research suggests GoPro didn’t have the best quarter.
Search interest trends remain decidedly weak. One of the best ways to gauge interest in GoPro product is to see how many people are searching the company online. Global search interest in GoPro spiked in late 2014, at the same time that GoPro stock was spiking close to $100. As search interest in GoPro fell from that late 2014 peak, so did GPRO stock.
Today, those search interest trends remain weak, and that’s a negative indicator for where GoPro stock is heading. Since April, search interest is down about 12% year-over-year. In the first three months of 2017, search interest was down 8% year-over-year. So, not only is search interest negative year-over-year, but the declines are getting bigger. That implies a ramp up in GoPro’s loss of popularity.
That is pretty negative news for GoPro stock ahead of its earnings report.
Meanwhile, web traffic checks are mixed. According to website analytics platform SimilarWeb, gopro.com web traffic share is trending up across all major categories. That includes globally, in the United States and among comparable consumer electronics websites.
Peer website analytics platform Alexa, though, gives a more neutral read gopro.com. According to Alexa, web traffic is more-or-less flat year-over-year. Quantcast, another website analytics platform, actually gives a bearish read on gopro.com. According to Quantcast data, gopro.com web traffic is actually down year-over-year.
With bearish search interest data and mixed web traffic data, I need something else to firmly decide my position on GoPro stock into its earnings report.
So I’ll do my periodic online channel checks. Looking at Best Buy Co Inc (NYSE:BBY) first, GoPro does have the best-selling action cameras on bestbuy.com. Looking at Target Corporation (NYSE:TGT) next, GoPro also has the best-selling action cameras on target.com. The same is largely true for Wal-Mart Stores Inc (NYSE:WMT), where GoPro products also dominate the best-selling action cameras list.
But this phenomena is nothing new. In fact, I do these online channel checks every time before GoPro earnings, and every time, GoPro has many of the best-selling action cameras on bestbuy.com, target.com and walmart.com. But even with those supposedly bullish channel checks, GoPro has disappointed on earnings and GoPro stock has done nothing but trend down. Consequently, I take these channel checks to mean that although GoPro’s action cameras are selling well, the action camera market at large is shrinking.
That means any upside in the quarter had to be driven by Karma, GoPro’s new drone. It’s a new technology in a growing market, so solid channel checks for Karma could point to upside in the quarterly numbers.
But my Karma channel checks are quite bearish. On bestbuy.com, Karma takes a backseat to a suite of DJI products. On target.com, Karma takes a backseat not only to a suite of DJI products, but also a host of other drones. The same is true on walmart.com.
Without the Karma catalyst, GoPro stock doesn’t really have anything material that points to the quarter being that good.
Bottom Line on GoPro Stock
Stay away from the stock now and into the foreseeable future. Unless some drastic changes come to the business or the action sports market at-large, GoPro stock should be avoided by investors. It’s purely for traders.
As of this writing, Luke Lango was long BBY, WMT and TGT.
