Recently, I was sitting at the beach with my wife and kids. We take to the seaside for our annual vacation at whatever hot spot we can find in Europe. Sea lapping at the shoreline along the beautiful Portuguese coast of Lagos when all of a sudden a guy on a mountain bike flew past our parasol, equipped with helmet and mounted GoPro camera. My wife asked “What the hell is on his head?” I replied “GoPro”. She, unlike the markets, responded with a blank face. Even for the non-hipster like myself, GoPro (GPRO) means something to a whole generation of lo-fi trekkers around the world. Its main camera product allows the user to record super high quality video footage in the most extreme of locations. It has developed a cult-like “emotionally responsive” following. The kind of psychology associated with devices like the AAPL iPhone.
Why GPRO For An Investor?
We have learned from the market that emotional response to a product bodes well for a company’s fortunes. Lately, GoPro has been doing great. Lee Jackson of 24/7 Wall St recently noted that a “10% owner of the company, Sageview Capital, sold a block of 700,000 shares of the stock at prices ranging from $56.51 to $57.07”. The big sales and stock price continues to respond to such moves.
Taking a look at the long-term picture, the stock started out in June 2014 at near the $31 mark. Within a short period of time and after some degree of media flamboyance the stock went to a high of $93.85 on October 6, 2014. On March 11, 2015 GoPro saw lows of $38.15 followed by a recent rebound in fortunes. So in the early stages of the stocks life what swings and roundabouts can we see? As the stock consolidates in a price range we can see that news reports can have a much bigger effect on movements over traditional, less volatile stocks. We witness a big move down in the earlier part of May 2015 after Wellington Management Group disclosed its 6.27% passive stake, down from the 12% stake the firm reported the previous month. Any type of news, good or bad, is likely to have a bigger effect on stocks movement over more traditional or less volatile candidates.
GoPro & Ambarella
Good fortune has not been confined to GPRO. Ambarella, Inc. (NASDAQ: AMBA) has seen 87% growth in one year. Amazing returns from a semiconductor stock. To what do we owe the success? Simple. GPRO is a major customer, accounting for one third of AMBA revenues. So not only is GoPro a performer in its own right, it has the ability to push other related stocks. Some would argue that such behavior is a sign of some degree of consolidation and maturity from the stock.
What Does The Future Hold?
Firstly, the stock is operating in a pretty wide range offering both long and short opportunities within moderate time frames of 3-6 months. However, for the short to medium term there appears to be a bias towards the long with the old ground of the $90s yet to be recovered. So perhaps it is time to leave the beach alone and get a GoPro equipped Paraglider?
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