GoPro (NASDAQ:GPRO) shares have struggled for a long time, and unfortunately for bulls, the charts still do not suggest that momentum is changing. The recent rebound off the opening lows was good, but GoPro stock remains trapped under bearish momentum.
There’s no uptrend in place and sellers continue to meet each rally and overpower the bulls. Will this go on forever? It’s hard to say. So long as GoPro can stay afloat — from a business perspective — GPRO stock could eventually find its footing.
But with the S&P 500, Nasdaq Composite and Dow Jones Industrial Average all hitting all-time highs, is GoPro the one investors really want to put their hard-earned money in? Why not Amazon (NASDAQ:AMZN), which is in breakout mode? Why not Microsoft (NASDAQ:MSFT) as it continues to hit new highs or Pinterest (NYSE:PINS) which just proved to Wall Street that growth and momentum are on its side?
GoPro could turn the tables and flip its technicals to a bullish state. If and when it does, I will change my mind. But as of now, that’s not the case.
Trading GPRO Stock
GoPro stock was rallying on Friday, but the 20-day and 50-day moving averages rejected the share price. It comes after the stock gapped lower on Thursday, and while GPRO rallied from the lows, it still finished lower by more than 9%.
Not that anyone could have predicted a near-10% fall, but the warning signs to not be long the stock were there. GoPro was forming what’s known as an ascending triangle, a bullish technical development. That’s where rising uptrend support (blue line) squeezes the stock against a static level of resistance. In this case, resistance came into play at $4.50.
No matter how hard GoPro stock tried, bulls just couldn’t crack this level of resistance. In the end, uptrend support gave way in January, with shares temporarily bottoming near $4. GoPro stock has since taken out that low, recently bottoming near more notable support at $3.70.
So what now? Now the setup becomes simple. Either bulls regain control, or momentum stays with the bears.
In order for bulls to regain control, the stock needs to reclaim the 20-day and 50-day moving averages — which were resistance on Friday — as well as $4.50 resistance. Over these marks and the bulls will have some wind in their sails, but potentially not for long, with the looming 200-day moving average up at $4.83 and declining.
In short, over $4.50 is more bullish, but GoPro would not necessarily be out of the woods.
On the downside, keep an eye on the $3.60 to $3.70 area. This zone has been sturdy support since August. The one time it failed, shares fell to the $3.25 to $3.30 area, which becomes the downside target should support give way.
Bottom Line on GPRO Stock
Causing Thursday’s 9.1% decline was a disappointing quarterly report. GoPro missed on earnings and revenue expectations for the fourth quarter. In a nutshell, the company has about as much momentum as the stock, which isn’t saying much.
Earnings of 70 cents per share missed expectations by 9 cents, while revenue of $528 million impressively grew 40% year-over-year. Unfortunately, it missed consensus estimates by more than $37.5 million.
CEO Nick Woodman said, “We believe we are well positioned to meaningfully expand both margin and EPS in 2020 thanks to the strength of our entire product line, high-margin Plus subscription service and app monetization strategy.”
But Wall Street isn’t buying it. Management can say “we are well positioned” or they can show that the company is well positioned. GoPro hasn’t showed us that and it hasn’t earned the benefit of the doubt either. In the eyes of Wall Street, a top- and bottom-line miss in a company’s strongest quarter amid a tight labor market and record consumer spending doesn’t scream “bullish” either.
Man, GoPro’s earnings result even missed the lowest estimate on the Street. EBITDA of $112.1 million missed consensus expectations of $126.5 million too.
I’m not trying to be harsh with GPRO stock. But the fact of the matter is that the company whiffed on the one quarter per year that it is expected to crush it. And now neither the business nor the stock price have any sort of momentum. If the latter changes, we’ll change too.
Until then, I am avoiding GoPro.