Options Trade of the Week 
GoPro Inc (NASDAQ:GPRO) Calls 
Sunday, February 08, 2015

**OPTIONS TRADE OF THE WEEK: Buy the GPRO Apr 2015 50.000 call (GPRO150417C00050000) at or under $3.20, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $5.50.

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by Ian Harvey

February 08, 2015

Introduction

**The Pullback By GoPro To Provide Profits!**

GoPro Inc (NASDAQ: GPRO), formerly Woodman Labs, Inc, develops hardware and software solutions to alleviate consumer pain points associated with capturing, managing, sharing and enjoying engaging content, had a major pullback after reporting fourth-quarter results which were in fact stellar despite what the market seems to indicate.

Quarterly revenue climbed 75.4% year over year, to $633.9 million, while adjusted earnings per diluted share tripled to $0.99. GoPro's own guidance called for revenue in the range of $550 million to $580 million, and earnings per share of $0.65 to $0.69. Analysts, on average, were expecting earnings of just $0.70 per share on sales of $580.3 million.

However, GoPro also forecast first-quarter earnings between 15-17 cents a share which was lower than the consensus estimate. GoPro Inc. shares declined as much as 13.5% in premarket trading Friday, and the sharp decline was also attributed to the surprise resignation of GoPro COO Nina Richardson, and the less-than-clear prospects of the business’s Media side, which does raise certain questions.

Many analysts provided negative feedback, as can be noted further in this report, but analysts at JPMorgan weighed in quite positively on GoPro shares Friday morning, noting the selloff is likely overblown for a number of reasons. JPMorgan reaffirmed a $70 price target and Overweight rating on GoPro.

Technical Oulook

The stock’s 50-day moving average is $56.55 and its 200-day moving average is $62.98. The company has a market cap of $6.947 billion and a P/E ratio of 151.22.

Analysts Opinions

In the research note today, JPMorgan analyst Paul Coster said ”he believes GoPro’s guidance for the first quarter seems quite conservative, and could very well surprise estimates in the next earnings results.“

He noted that, firstly, demand for GoPro camera continues to climb especially in foreign markets where the opportunity is massive. Next, the overall quarter was fundamentally very strong, with revenues up 75% year-over-year, and that when taking the company’s expected growth as a factor in the price-to-earnings valuation, GoPro shares seem attractively priced.

The company has also been the subject of a number of other research reports:-

• Analysts at Barclays lowered their price target on shares of GoPro from $60.00 to $55.00 and set an equal weight rating on the stock in a research note on Friday.

• Analysts at Citigroup Inc. lowered their price target on shares of GoPro from $59.00 to $48.00 and set a neutral rating on the stock in a research note on Friday.

• Finally, analysts at Wedbush lowered their price target on shares of GoPro from $98.00 to $70.00 and set an outperform rating on the stock in a research note on Friday.

Two analysts have rated the stock with a sell rating, ten have given a hold rating and seven have given a buy rating to the company. GoPro presently has an average rating of Hold and a consensus price target of $60.17.

Conclusion

Based on the solid performance metrics last week it seems that a signal has been given that GoPro will be on track to meet its guided long-term margin target of 42-44%, due to a favorable sales mix, with average selling prices likely to move higher as more feature-heavy cameras are added to the lineup. Furthermore, new media partnerships will continue to push the stock higher and boost top-line growth. Expect GoPro to start moving upwards again which will be beneficial to this options trade.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE OF THE WEEK: Buy the GPRO Apr 2015 50.000 call (GPRO150417C00050000) at or under $3.20, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $5.50.


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