GoPro Inc (GPRO) stock has been through some ups and downs during its few short years as a publicly traded company. In 2014, GoPro stock debuted and instantly became one of the hottest names in the market, with shares nearly quadrupling from their $24 IPO sticker.
It’s safe to say that 2014 was mostly an “up” year.
But in 2015, the honeymoon quickly came and went, and GPRO stock cratered, plunging 74% as its IPO buzz faded. Worries sprung up about a commoditized action camera market, and a product it was pinning major hopes on — the Hero4 Session — flopped.
We can safely say that 2015 was a “down” year for GoPro stock.
But what of 2016? Well, it’s actually been fairly bleak as well, with GPRO shares down 35% on the year already. There are good reasons for this: Namely a horrible fourth-quarter that took investors by surprise, as well as the revelation that GoPro — once Wall Street’s go-to growth stock — actually expects revenue to decline this year.
With all that being said, I think GoPro’s darkest days are in the rear-view mirror. And increasingly, Wall Street feels that way too.
GPRO Shorts Filing for the Exits
On Wall Street, a stock’s short interest is closely monitored. Twice a month, reports come out detailing the number of shares that the market has “sold short,” betting that shares will fall instead of rise.
Stocks like GPRO that have fallen 70% in the last year quite frequently see high short interest, and GoPro shares haven’t betrayed that tendency. In mid-January, 35.3 million of the company’s 100 million shares were sold short, meaning more than one in every three publicly traded shares of GoPro was on loan to someone who sold the stock and bet it would go lower.
But since then, shorts have become less and less confident in GoPro’s imminent demise. By mid-February, GoPro bears had started their retreat: Only 26.4 million shares of GPRO stock were being shorted, 25% less than the month before.
By the end of February, short interest fell another 20% to 21.1 million shares.
It makes sense: GoPro stock bottomed in early February around $9 per share, an absurdly low level for a company with $474 million in cash on its books and zero in long-term debt. GoPro trades around $9 per share. Excluding cash, though, GPRO trades at $4.26 per share, or 17 times trailing earnings.
Given recent partnerships with Twitter Inc (TWTR) and Microsoft Corporation (MSFT) aimed at increasing GoPro’s social media presence and enhancing its content business, respectively, there are still catalysts on the horizon.
Of course, GoPro is a consumer tech company at heart, and CEO Nick Woodman announced that the GoPro Hero5 will be dropping later this year, and will be built to connect more easily to smartphones and the cloud. Its widely anticipated “Karma” drone should debut in the first half of the year, and will be backward-compatible with the Hero5.
Sure, it’ll take some time to recover from 2015’s fumbles, but Woodman and GoPro management are well aware of what needs to be done and they’re setting out to do it. Even GPRO bears are taking notice … which means it’s about time GPRO bulls took another look at the stock as well.
As of this writing, John Divine held none of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.