Last year was awful for GoPro Inc (NASDAQ:GPRO). The company faced shareholder lawsuits (and still does), recalls for its Karma drones and a 50% haircut for GoPro stock. A new year can bring new opportunities, but can GoPro finally turn things around?
Unfortunately for GoPro, the company isn’t making any waves at this year’s CES in Las Vegas. GoPro has said that it will relaunch its Karma drone this year, and has some fresh designs on display at CES, but there has been little to no buzz generated so far.
This is unfortunate for GoPro stock, as the drone market is expected to grow roughly 50% this year to $1.2 billion in revenue, according to the Consumer Technology Association, which runs CES.
Click to Enlarge Technically speaking, GPRO stock is hovering in the high single digits. The shares have found support in the $8.50 region, but trendline resistance at its 10-day and 20-day moving averages continues to apply pressure. What’s more, the $10 region could provide psychological resistance for GoPro stock once these short-term moving averages are breached.
On the sentiment front, GoPro stock remains in the dog house. Zacks reports that 14 of the 16 analysts following GPRO rate the shares a “hold” or worse. Furthermore, the 12-month consensus price target rests just overhead at $10.08. And the situation is getting worse, as analysts at Piper Jaffray cut their target on GoPro stock to $8 last week.
On the short-selling front, GPRO bears have begun to take some profits. As of the most recent reporting period, some 32.8 million shares of GoPro stock were sold short, representing about 32.4% of GPRO’s total float. This figure is down from a short-to-float ratio near 35% in late November. That said, the shares have nothing to show for the added buying pressure.
Finally, options traders are also placing large bets against GoPro stock. At last check, the January 2017 20 series put/call open interest ratio rested at 1.05, with puts and calls in near parity. As for implieds, options traders are pricing in about a 10% move for GPRO through January expiration, placing the upper bound near $9.90 and the lower bound near $8.10.
2 Trades for GoPro Stock
Put Spread: Traders looking to jump on the bearish bandwagon might want to consider a Jan 2017 20 series $8/$9 bear put spread. At last check, this spread was offered at 38 cents, or $38 per pair of contracts. Breakeven lies at $8.62, while a maximum profit of 62 cents, or $62 per pair of contracts, is possible if GoPro stock closes at or below $8 when January options expire.
Call Spread: With the shares surrounded by negativity, and plenty of money on the sidelines, all it would take is one spark at this point to set GoPro stock skipping higher. Granted it’s a long shot, but traders looking to take a risk for a substantial gain might want to consider a Jan $9/$10 bull call spread.
At last check, this spread was offered at 29 cents, or $29 per pair of contracts. Breakeven lies at $9.29, while a maximum profit of 71 cents, or $71 per pair of contracts, is possible if GoPro stock closes at or above $10 when January options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.