GoPro Inc. (NASDAQ:GPRO) is hot today as we start another week of trading stock options. GoPro with its market cap of $7.81B produces mountable and wearable cameras and accessories for action sport enthusiasts.
Last week on Thursday, I wrote about trading the options of GoPro in a post titled, “Buy GoPro Calls, Ignore Citi Analysts”. That post come on the backdrop of a scathing rebuke that GoPro got from two analysts from Citi Research Group. The analysts, Jeremy David and Ehud Gelblum opined that GoPro’s camera is only appealing to hardcore action sport enthusiasts.
They also suggested that the general consumer electronic market has largely ignored GoPro. They then went ahead to slash their EPS and revenue estimates on the company. The analysts said they expected GoPro to deliver earnings of $1.55 per share instead on revenue of $1.85 per share instead of the previous EPS of $1.86 on revenue of $2.19B.
My Contrarian Move
However, I did not buy into the pessimistic outlook of those Citi analysts. I showed you the impressive performance of a previous bull call that I initiated on GoPro. I had recommended the GPRO Oct 2015 $60 call at an asking price of $3.00 and it has jumped to $4.50. In fact, I reiterated my bullish conviction on that call options and I recommended that you should buy the e GPRO Oct 2015 60.000 call (GPRO151016C00060000) at an asking price of $4.50.
As at 11:49AM EDT today, the said contract has jumped to command an asking price of $5.30. The new asking price suggests that the contract has gained 17.8% in two trading sessions.
New GoPro Coverage
One of the reasons behind the pessimistic analyst outlook on GoPro was the perceived rising dominance of drones in the consumer tech sector. The analysts opined that people are focusing on drones and that GoPro might end up as a passing fad.
However, GoPro has responded with drones of its own in order to stay relevant and competitive in a fast-changing world. GoPro CEO, Nicholas Woodman made this announcement last month at the Code Conference. The market didn’t take the news seriously, because everybody has come to know GoPro as an action sports camera company.
However, the company is already marketing itself as something more than just a camera maker. Rumor is already going around the grapevine that GoPro is serious about its drone undertaking and I find it difficult to be skeptical. For one, it is only logical that GoPro starts making drones for action sport enthusiasts. According to Bilal Zuberi of Lux Capital “Consumer and commercial drones are regularly used at sporting events like skiing, snowboarding and surfing–the same places where GoPro rules“.
How to Trade GPRO Options
GoPro remains a hot tech stock and the naysayers will need to do a harder job to bring it down. The stock has already gained almost 1% to a $58 trading price in today’s session. The stock is climbing slowly towards its 52-week high of $98.47. I recommend buying GPRO call options. The GPRO Oct 2015 60.000 call (GPRO151016C00060000) remains the hottest contract in the chain. Old player should lock in profits with a stop/limit order at $5.10; new buyers should join the contract at an asking price of $5.30.
— Daily Option Alerts