GoPro Inc (GPRO) Option Bears Bet on Another Earnings Miss

As GoPro Inc (GPRO) prepares to report first-quarter earnings, bearish sentiment is running higher than usual

May 4, 2016 at 11:21 AM
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Camera maker GoPro Inc (NASDAQ:GPRO) is preparing to report first-quarter earnings after tomorrow's close, and option traders seem to be betting on a miss. GPRO has averaged a move of 11.1% in the session following the company's seven earnings reports -- with the last three in a row being moves to the downside. But today, option traders are pricing in an even wider swing of 21.6% for the stock, based on near-term at-the-money straddle data. And considering the recent preference for puts, it’s clear another post-earnings drop is anticipated.

Over the past two weeks, options traders have been more pessimistic than usual, with GPRO's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 1.04 sitting in the 92nd percentile of its annual range -- a significant change of pace from the heavy appetite for calls seen in April.

The weekly 5/6 14-strike put has garnered the most attention in the past two weeks, with more than 15,000 contracts added. Those who purchased the puts to open expect GPRO to remain south of $14 through Friday's close, when the weekly options expire.

Those traders are paying up for GPRO's short-term options, as volatility expectations have been creeping up ahead of earnings. Specifically, the stock's Schaeffer's Volatility Index (SVI) of 101% ranks higher than nearly two-thirds of the past year's readings -- and at its highest level in three months -- indicating that near-term options are likely to be pricey at the moment. Still, GPRO's Schaeffer's Volatility Scorecard (SVS) sits at a lofty 82, suggesting the security has tended to make outsized moves compared to what the options market has priced in over the past 12 months.

Outside of the options pits, bearish sentiment has also been running high, with short interest accounting for nearly one-third of GPRO's total available float. Analysts don't seem to have high expectations, either. At the moment, 10 of the 16 brokerages providing coverage call the stock a "hold" or "strong sell."

And on the charts, GPRO has been struggling with resistance at the $14 level for months. The shares also gave up a short-term foothold at their 80-day moving average on Monday, and have now shed 76% year-over-year -- last spotted flat at $11.65. Should GoPro Inc (NASDAQ:GPRO) pull out a positive earnings surprise, an unwinding of bearish sentiment could help the stock reclaim some ground. 

GPRO Daily Chart


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