Happy New Month! It is a splendid day and I am roaring to take the bull by the horns as we enter another month of trading stock options profitably. In today’s piece, we will examine the options of GoPro Inc. (NASDAQ:GPRO). I have mentioned GoPro quite a number of times in my previous coverage of Ambarella. There exists a close relationship between GoPro and Ambarella and the performance of GoPro’s business often affects how the shares of Ambarella are traded.
GoPro with its market capitalization of $7.13B produces mountable and wearable cameras and accessories. The Company’s products are cameras, mounts, accessories, and software and app. The Company’s cameras are HERO4, HERO3+, and The HERO in addition to a number of mounts products and accessories.
Why We Are Looking at GoPro Today
GoPro has had my attention since Tuesday when the company reported its first quarter (Q1 2015 Call Transcript) results. GoPro reported another stellar quarter that beats its own guidance and the estimates on the top and bottom lines as the company marks the third consecutive quarterly outperformance in the 4 quarters after its IPO. The highlights of the first quarter results are presented below:
GoPro reported earnings of $0.24 per share to beat the consensus estimate of $0.18 per share to mark a 149.4% year-over-year increase from earnings of $0.10 per share from the comparable quarter in 2014
The company reported revenue of $363.1M to beat the consensus estimate of $340.99M and to mark a 54% year-over-year improvement on revenue of $235.7M from the comparable quarter in 2014
The company’s gross margins came in at an impressive 45.1% above the guidance and above the consensus estimate of 44%
Cash and Cash equivalents now stand at $491.9M to give the company about half a billion dollars in reserve
From the earnings highlight provided above, it is obvious that GoPro has performed both its guidance and analysts estimates in the recently reported quarter. GoPro critics might be quick to quip that the company was able to deliver strong Q1 results because it has earlier provided weak guidance. Hence, I am impressed with the optimistic guidance that the company has posted for the second quarter.
For the second quarter, GoPro expects earnings of $0.24 to $0.26 per share, above the consensus estimate of $0.16 per share. The company expects revenue between $380M and $400M above the consensus estimate of $333.7M and it marks a 59% increase in revenue up from the 54% increase reported in the second quarter.
Where is GoPro Headed?
The shares of GoPro have suffered wild swings since its IPO because of the high volatility occasioned by media hype and sky-high expectations on the company. In fact, the stock has climbed from a 52-week low of $28.65 to a 52-week high of $98.47, before it crashed to another $36 low. More so, the shares of GoPro has fallen from a $54.06 high after the Q1 earnings release to record another 5.44% drop to a closing price of $50.08 in yesterday’s session.
However, I believe that the days of mad swings in the share price are over, as the stock becomes reasonably valued and all the exuberance about the “new kid on the block” has worn off. Hence, I believe that the shares of GoPro will now trade in consonance with the company’s fundamentals (which are incredibly strong) as opposed to swinging with every news headline that concerns GoPro.
I believe in the prospects of GoPro to evolve from being a gadget-maker for the die-hard sports enthusiast to becoming a tech-maker that provides everyday people with a tool for capturing moments. I recommend buying GPRO call options and you should consider buying the GPRO Oct 2015 60.000 call (GPRO151016C00060000) at an asking price of $3.00.
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