While few stocks had a particularly positive Thursday — as evidenced by a 2% one-day decline for both the Dow Jones and the S&P 500, as well as an almost 3% pounding for the Nasdaq — GoPro (GPRO) was arguably the winner with regards to taking the least painful losses.
Shares of GPRO got kicked more than 7% lower Thursday, and Friday’s action extends GPRO stock’s losing streak to seven days, opening its year-to-date wound by a deep 21%.
For those unfamiliar with GoPro, its bread and butter is in peddling action cameras and accessories, and GoPro only began offering on the public markets last year when GPRO stock made its action-packed debut.
But this year, GPRO stock has been on a thrill ride of its own.
GPRO Might Need a Helmet
The year kicked off in the wrong direction for GoPro before investors changed their tune. Shares had marched upwards from a March low of under $40, all the way up to the $65 mark (GPRO stock’s highest point since early January). Even a blip in late June appeared to be just that — a blip.
As I pointed out last month, investors seemed to sense an overreaction in that selloff and began snatching up shares and recharging the favorable momentum.
While the current selloff is also arguably an overreaction — at least considering valuation — investors should proceed with caution given the broader market’s momentum.
In isolation, GoPro looks reasonably priced and thus a solid candidate for bottom-fishing. The stock is trading for 23 times forward earnings yet is slated for long-term annualized earnings growth north of 30%. Toss in four consecutive earnings beats, sales growth of 40% slated for the full-year, double-digit profit margins, continued innovation (including the launch of five new cameras in the past 10 months) and a buzzworthy brand — GoPro sure seems to be cooking up one sizzling recipe for success.
But once again, investors are beyond skittish right now, with the S&P 500 sinking to a six-month low and nearing a net loss for a year.
GoPro stock, meanwhile, has been even more volatile, and GPRO shares have broken below both their 50-day and 200-day moving average thanks to the recent bloodbath.
Put another way, momentum is not on GPRO’s side; and where small fluctuations in the broader market translate to outsized multi-day losing streaks, momentum matters big-time for a stock like GPRO, .
While bottom-fishing is always risky, it’s arguably a fool’s errand at a time like this. While the gambling investor who times a long-term entry right might make an extra buck, most investors are better off sacrificing a few pennies of profit in order to ensure the stock has momentum before jumping back in.
The company’s most recent earnings report, which featured 72% year-over-year sales growth and triple-digit earnings growth, confirms that GoPro stock’s long-term prospects are solid and a rebound is likely … but the tough reality is that such a trading turnaround may not be any time soon give the broader state of affairs.
Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Forbes, Business Insider, MSN Money and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she did not hold a position in any of the aforementioned securities.