Is GoPro Inc (GPRO) Stock A Value Play Or Value Trap Near Its All-Time Low?

Is GoPro Inc stock a bargain at these levels? Could GPRO stock gain on account of a short squeeze in the near-term?

Is GoPro Inc (GPRO) Stock A Value Play Or Value Trap Near Its All-Time Low

Shares of San Mateo, California-based GoPro Inc (NASDAQ:GPRO) seem to be falling in slow motion of late. GPRO stock has taken a beating in the month of March alone, losing almost 22% after a flurry of analyst downgrades. GPRO stock is trading near its all-time low of $7.14, more than 42% off its 52-week high. Investors might feel that the stock is cheap and would wonder whether GPRO stock is a value buy at these levels. There's also another question which pops up - is the worst over for GoPro Inc (NASDAQ: GPRO)? Shares of the action camera maker were up almost 9% in the after-hours trading on account of fresh commentary on Q1 guidance yesterday. Yet, GoPro Inc (NASDAQ: GPRO) stock is still near its all-time low. Should you buy now?

GoPro Management Issues Positive Pre-Earnings Commentary.

Yesterday, on March 15th, GoPro's management made an announcement that the company's Q1-2017 revenue would be in the upper end of its previously announced $190-$210M guidance. The consensus revenue estimate is $200.07M. The action camera maker also reaffirmed its target of full-year non-GAAP profitability. GoPro Inc also announced 270 more job cuts as part of its restructuring plans. These layoffs are in addition to the 200 back in November 2016. The company expects to reduce its full-year GAAP operating expenses to below $585M and non-GAAP operating expenses to below $495M on account of the restructuring without impacting their roadmap for new products.

Investors need to take this commentary with a pinch of salt. As a post on Seeking Alpha highlights, hitting the Q1 guidance is a good step, but this only translates to 15% of GoPro's annual target of $1.2B. It still has a very long journey ahead. Although the management states that GoPro's product roadmap remains intact, a Forbes article claims that the cuts have largely been at the company’s virtual reality and broadcasting wings, and goes to the extent of saying that “no one is left” to supervise these departments. This really doesn't sound very good, as many analysts and industry experts believe that VR could be the next big frontier which could be a great growth opportunity for the No.1 action camera maker. The flooding of the market with similar devices to those of GoPro's, at lower prices, also does not help GoPro Inc's (NASDAQ: GPRO) cause.

A Lot Will Depend On GoPro's New Products.

The action camera maker needs to re-invent its product lineup. If it plans to continue banking on its Hero line of products without any new innovative products, it is bound to die a slow death. GoPro needs to come up with much more improved offerings and should not repeat its 'Bad Karma'. The San Mateo company could start growing in size and profitability if it builds impressive product lines based on Karma, Hero and VR offerings. The products should be at least competitive on all fronts if not the best. The latest reviews rate the Karma drone as the poorest in some aspects. It comes last in terms of low-light sensitivity among its competitors. It's time for GoPro to make consumers excited again with its new products.

GoPro Stock Could Benefit From A Short-Squeeze In Near-term.

The latest short interest data as of Feb 28th shows that there has been a decrease of 4.6% in the number of shorted GoPro Inc (NASDAQ: GPRO) shares, to 30.98M shares from 32.48M shares. However, the shorted shares still account for a whopping 32.4% of the float. GPRO stock dived to its new all-time low of $7.14 during the March 15th trading session. A Seeking Alpha post highlights that this recent severe downward movement of GPRO stock has been caused by the selling pressure created by the shorts, and the fact that some institutional investors closed their positions. The current scenario has created a perfect platform for a short squeeze. With 13 days required to cover all short positions and yesterday's pre-earnings announcement which saw GPRO stock go up by almost 10%, there could be a strong case for a short squeeze soon.

GoPro Stock Still Remains A Risky Bet.

GoPro Inc (NASDAQ: GPRO) still needs to cover a lot of distance and it has to prove that its annual revenue target is achievable even after so many recent layoffs. As Goldman Sachs (NYSE:GS) analyst Simona Jankowski points out, the San Mateo company has "significant challenges" with the saturation of the action camera market, product rollout issues and disappointing entry into drones. A lot is now riding on its new products. GPRO stock is now trading above Citi analyst Stanley Kovler's $8 price target, taking into account after-hours trade. He recently started coverage on GPRO stock with a sell rating. As highlighted by Stanley Kovler in his coverage, GoPro's "market-leading products aren't enough to offset the overall decline in standalone imaging products and increased saturation in mature markets". GPRO stock remains a risky bet until it comes with an impressive new product line up and executes its present plans perfectly.

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Sreekanth Anasa Sreekanth Anasa   on Amigobulls :

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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