Since the company’s initial public offering in June 2014, GoPro Inc (GPRO) stock has gone south. GPRO stock has plummeted nearly 75% since its IPO, with the company’s last quarterly earnings report sending the shares into single-digit territory.
But, while GoPro’s long-term outlook remains in question, there are potential trading opportunities for GPRO stock bulls over the short term.
Click to Enlarge From a technical perspective, GPRO is showing signs of life. The stock has bounced off its 52-week low near $8.50, and has even reclaimed its 10-day moving average — a trendline it last traded north of in late April. With momentum on its side, GPRO stock’s next major hurdle is $10, and a breakout here could solidify the shares’ uptrend through GoPro’s next quarterly report.
The sentiment backdrop for GPRO is exactly what you would expect for a stock down 75% since its IPO. According to data from Zacks, GPRO stock has attracted six buy ratings, eight holds and two strong sell ratings.
Meanwhile, the 12-month price target of $12.68 represents a roughly 36% premium to the stock’s current trading range, indicating that the brokerage bunch still has hope for a recovery in GPRO stock.
Elsewhere, short sellers are betting heavily on additional losses for GPRO. While short interest declined by about 6% during the most recent reporting period, 22.5 million shares remain sold short. With GPRO recovering from all-time lows, some profit taking is to be expected.
While a continuation of this trend could be bullish for GPRO, it will take more than an oversold bounce to chase these bears from their positions.
On the options front, speculators are beginning to look for a continued rally for GPRO. Over the past several weeks, the June/July put/call open interest ratio for GPRO has fallen to 0.81, as calls are added at a faster rate than puts among near-term options.
Overall, July implieds are currently pricing in a potential move of more than 13% for GPRO stock. This places the upper bound at $10.46, while the lower bound lies at $8.06. Since both levels put GPRO stock outside of significant support and resistance levels, there is the potential for a greater-than-expected move.
2 Trades for GPRO Stock
Call Spread: Those options traders looking to bet on the current uptrend might want to consider a June $9.50/$10 bull call spread. At last check, this spread was offered at 17 cents, or $17 per pair of contracts. Breakeven lies at $9.67, while a maximum profit of 33 cents, or $33 per pair of contracts, is possible if GPRO closes at or above $10 when June options expire.
Put Sell: Alternately, for those not looking for an outright bullish play, a GPRO June $8 put sell has a high probability of finishing out of the money. At last check, this put was bid at 17 cents, or $17 per contract.
As usual with a put sell, you keep the premium as long as GPRO stock closes above $8 when June options expire. On the downside, if GPRO trades below $8 prior to expiration, you could be assigned 100 shares for each put sold at a cost of $8 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
