GoPro Inc (GPRO) Trying to Avoid Another Earnings Meltdown

GPRO stock has historically fared poorly in the aftermath of earnings

Feb 1, 2017 at 10:40 AM
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GoPro Inc (NASDAQ:GPRO) will report earnings after the close tomorrow, and if past is prologue, post-event technical turbulence could be in store. In six of the last eight post-earnings sessions, the camera stock has ended lower -- with an average loss of 7.8%. Right now, the options market is pricing in an even bolder swing of 16.2% in either direction.

Speaking of options, traders have taken a glass-half-full approach of late. During the past two weeks across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open twice as many GPRO calls as puts.

Against the backdrop of heavy short interest, though, it's possible call buyers could be short sellers picking up hedges against a potential post-earnings breakout. Specifically, about one-third of GPRO's float is sold short, which would take roughly two weeks to cover, at the stock's average daily trading level.

At last check, the shares are down 1.5% at $10.59, and there are signs that more downside could be in store. For example, after adding over 23% in January -- boosted by upbeat camera sales projections -- GoPro had a 14-day Relative Strength Index (RSI) of 71 last night, in "overbought" territory, suggesting a pullback could have been in the cards. Not to mention, the stock is currently testing potential resistance at its 80-day moving average.

gpro daily feb 1

Despite GoPro Inc's (NASDAQ:GPRO) recent run higher, the fact is, it's been a long-term dud. As the chart above shows, the stock has been sliding since its early October high of $17.68, shedding 40% of its value in just four months.

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