Options Trade of the Week 
GoPro Inc (NASDAQ:GPRO) Calls
Monday, September 01, 2014

**OPTIONS TRADE OF THE WEEK: Buy the GPRO Jan 2015 55.000 call (GPRO150117C00055000) at or under $3.00, 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

September 01, 2014

Introduction

The Nicholas Woodman-led company, GoPro Inc (NASDAQ: GPRO) just continues to soar, and should continue to do so due to the increased interest in what it offers and the continual development of its products.

GoPro went public on June 26, starting as a bootstrapped company – check out the article I wrote for Investopedia on “Companies That Succeeded With Bootstrapping” with GoPro as one of these companies.

Members of Stock-Options-Made-Easy also enjoyed a profit of 114% from a recommendation on July 15, and can be viewed here .

GoPro Inc soared again on Friday, up nearly 6.0% to settle at $51.80, reaching an all-time high at $52.13-- just a day after rallying 7.4%. Calls are trading at a fast and furious pace -- at five times the typical intraday volume -- and short-term contracts are being targeted, based on the 9.0% rise (to 62.7%) in GPRO's 30-day at-the-money implied volatility.

Earnings

GoPro last released its earnings data on Thursday, July 31st. The company reported $0.08 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.07 by $0.01. The company had revenue of $244.60 million for the quarter, compared to the consensus estimate of $237.97 million. GoPro’s revenue was up 38.1% compared to the same quarter last year. On average, analysts predict that GoPro will post $0.79 earnings per share for the current fiscal year.

Positive Moves

For now, GoPro stock is enjoying the windfall from increasing margins, which are up 110 basis points to 42% on the back of a better product mix. GoPro’s most well-received product is its most expensive camcorder, the Hero3+ Black, whose sales contributed to the majority of the company’s revenues last quarter. GoPro reported that retailers who had earlier stocked the lower-priced White and Silver Hero camcorders were now asking for the Black version, and that the Black camcorder sales will continue to account for a higher proportion of the company’s revenues.

Moreover, recent accessories released by the company such as ‘Fetch’ for pets and Grenade Grip for snowboarders have been a hit among customers. This shows that GoPro continues to excel at identifying consumer wants and needs and developing products to exploit that gap. It comes as no surprise that the demand for GoPro products is rising prior to the holidays and analysts expect the company to post a bumper fourth quarter as holiday sales pick up.

Expanding into the content media platform looks set to be the next big play for GoPro Inc. The company’s YouTube channel already commands huge following of up to 700,000 people.

Despite experiencing huge success on the camera side of the business, GoPro is also providing a number of computer software and mobile apps that are used to accelerate the posting of photos and videos on social network platforms.

Analysts Opinions

Analysts at Dougherty & Co reiterated a “neutral” rating on shares of GoPro in a research note on Monday, 25th August.

Dougherty & Co Senior Research analyst, Charlie Anderson, sees GoPro Inc. as already being in the holiday season mode with a line of products it hopes will accelerate growth.

Anderson believes that GoPro is primed to enjoy impressive sales in the second half of the year.

Anderson also believes that GoPro Inc. is set to take full advantage of the accessories market with its new displays reportedly occupying twice the shelf space for accessories in some of the stores.

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

Also, analysts at Robert W. Baird raised their price target on shares of GoPro from $43.00 to $45.00 in a research note on Friday, August 1st.

One equities research analyst has rated the stock with a sell rating, six have given a hold rating and three have assigned a buy rating to the stock. The stock has an average rating of “Hold” and a consensus target price of $48.67.

Conclusion

Experiential consumption is reshaping consumer behavior – consumers react against sedentary lifestyles and are engaging more in sports and outdoor activities, obstacle courses like the Tough Mudder are growing in popularity and signify a rising trend towards fitness.

GoPro understands the growth prospect associated with this concept -- the trend for experiential consumption – a miniature technologically advanced and multifunctional camera with the ability to capture footage from a hands free point of view perspective, being the basis of the company, which will continually keep pushing GPRO’s share price higher.

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


**OPTIONS TRADE OF THE WEEK: Buy the GPRO Jan 2015 55.000 call (GPRO150117C00055000) at or under $3.00, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $5.50.


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