Don't Jump Into GoPro Stock Right Now

  • GoPro stock rose 12.42% on 16 Feb following the announcement of a partnership with Microsoft.
  • Statements by Microsoft's Nick Psyhogeos don't have much in them for GoPro.
  • Investors would do well to wait for the GoPro Karma to be launched in 2016, before jumping in.

GoPro (NASDAQ:GPRO) stock popped a staggering 12.4% on 16 Feb following a recent announcement by Microsoft regarding a partnership with the action camera manufacturer. The post quoted Nick Psyhogeos, president of Microsoft Technology Licensing, “This agreement with GoPro shows the incredible breadth of technology sharing enabled through patent transactions,”. Quoting from the post on the Microsoft News Centre, Psyhogeos went on to say  “Microsoft’s licensing of personal wearable technologies is seeing strong demand as we partner with companies from all industries to optimize solutions for their customers around the globe.”

What investors must note though is that none of this says much about how this will impact GoPro, barring the fact that the company will be licensing "certain file storage and other system technologies.". There's been a fair amount of speculation about how GoPro could use Microsoft's services, but none of the theories doing the rounds have been confirmed at this point of time.

How It Could Help GoPro

One theory is that GoPro might be looking to use Microsoft's cloud services to transfer and store content recorded by users of its cameras. Back in June 2015, GoPro CEO Nick Woodman discussed in an interview with TechCrunch, his intent to connect GoPro cameras to the cloud to enable passive uploads of footage to a cloud service, and cut out the tedious task of transferring data via SD cards to computers.

This theory is somewhat loosely supported by Woodman's commentary following GoPro's forgettable Q4 2015 earnings, where he said: "we recognize the need to develop software solutions that make it easier for our customers to offload, access and edit their GoPro content.". On the same call, Woodman said "we are ensuring that any new and existing hardware products do a better job of connecting to smartphones and the cloud.", concluding the same paragraph by saying " Later this year, we will introduce the most connected and convenient GoPro we have ever made, HERO5."

Another theory speculates that GoPro might be interested in using Microsoft's exFAT file system to improve the ability of its devices to save larger files on flash-based storages. Either way, neither of these theories seem to justify the big pop in GoPro's stock price. While both these possibilities could end up making GoPro cameras more likeable, there's not enough evidence to suggest that GoPro's bad days are behind it.

Don't Jump The Gun With GoPro Stock

GoPro's stock has taken a severe beating over the last 12 months and is still down by nearly 75%, even after yesterday's big move up. At times like these, even small positive announcements manage to produce exaggerated stock price movements. Take for instance the recent 11% jump in GoPro's stock price following JP Morgan analyst Paul Coster's bullish note on GoPro. However, GoPro's stock declined further from there following the company's earnings release, and from the looks of it, there's more trouble ahead.

GPRO stock chart

GoPro stock price chart by

It hasn't been a great year for GoPro with its Hero 4 Session camera putting up a poor show. Rather tepid sales numbers compelled GoPro to slash Hero 4 Session prices from $399 to $299 and then further down to $199. To make things worse, Q4 earnings were a catastrophe, with GoPro reporting a massive 31% decline in revenue with GAAP and non-GAAP losses to boot. The company's guidance for the current quarter (Q1 2016) and FY 2016 indicate that things are going to get worse, with a further decline in revenue on a year-on-year basis.

The anticipated launch of GoPro's Karma consumer drone in early 2016 could potentially turn things around for the company. However, until GoPro sees some positive traction from that launch, the stock seems fraught with risk. Investors would do well to sit out the excitement and wait for some serious positive triggers before buying into the GoPro stock.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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