GoPro (GPRO) Stock: Don’t Lose Your Hind Quarters!

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GoPro Inc (NASDAQ: GPRO)

GoPro has been having an incredible time in the market as of late, and for good reason. Lately we’ve seen a ton of good news surrounding the stock. Knowing that the news moves the market, it’s clear why the stock is gaining. Nonetheless, there is a dark side here. Today, we’ll talk about the good news that we’ve seen, the dark side, and why I believe GPRO is a losing bet.

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GPRO Has Seen Some Good News

About a year ago, we were seeing quite a bit of bad news. However, more recently, things have started to pick up for GoPro as we start to see positive news around. Here’s what we’re seeing:

  • Drones – One of the major players for the bulls is drones. These days, drones are taking off like a rocket. Everyone seems to want one. There’s even a drone racing sport starting to gain in popularity. The sport is simple. Fly the drone and use virtual reality to view the camera as though you are in the driver seat. One of the big arguments among the bulls is that drones need high quality cameras that can handle the vibration and motion associated with flight. GPRO cameras are perfect for this. So, bulls argue that the new popularity of drones will likely send the stock upward.
  • Analysts – Recently, we’ve seen quite a bit of positive news out of analysts. In fact, Zacks said that the company’s growth plans are on track. On top of that, Tractica has reported that drone sales are taking off. Finally, JPMorgan sees surprisingly positive growth coming soon.

So, all in all, the bullish case for GPRO is not only a valid one, it is increasingly impressive. Nonetheless, we haven’t gotten to the dark side.

Luke, I Am Your Father

As with the hit movie, GoPro is a company that is trapped between the good and bad. The truth is that there is plenty of concern surrounding the stock. In fact, the concerns are so large that Invesco’s Wilbur Ross made the decision to eat a nearly $500,000 loss by selling all of his 43,000 shares in the stock. So, what’s the big deal?

The problem for GPRO isn’t their business, it’s their product. The reality is that action cameras are cool. However, the average consumers simply has no need for one. Therefore, shelling out hundreds of dollars for a high-end, mountable, action camera isn’t on the priority list for the average person. At the end of the day, the audience that will actually pay this kind of money for an action camera is incredibly small.

Recently, GPRO investors cheered when ION, a competitor in the action camera space announced bankruptcy. However, instead of applauding, the investors should have been crying. ION had an incredible product. However, the fact that the company went bankrupt underscores the fact that there is little demand for these types of products. Sure, this is a sign that competition is falling, but if we’re all competing for the pennies at the bottom of a wishing well, all can drop out but one, and the one that stays in will likely never become profitable!

The Bottom Line

We’ve seen fads in the past. Companies will release cool products that have no real audience. While the products are cool, these companies tend to drop like flies. In the case of GoPro, we’re not seeing a wave of products that are flying off of the shelves. We’re seeing fads that make consumers say, “That would be cool,” then walk away and spend their money elsewhere. At the end of the day, if you’re long on GPRO, chances are that you’re going to take a loss.

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What Do You Think?

Where do you think GPRO is headed moving forward and why? Join the discussion at TalkTRENDZ from CNA Finance!

[Image Courtesy of Flickr]

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