Bears Pile On GoPro Stock Ahead of Earnings

GoPro will report earnings after the close on Thursday, April 27

Apr 26, 2017 at 10:37 AM
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GoPro Inc (NASDAQ:GPRO) will report earnings after tomorrow's close. Ahead of the quarterly event, pessimism's been running high in the options pits and beyond. Below, we'll take a closer look at the expectations for GPRO shares heading into the company's earnings release.

For starters, short-term traders have preferred puts over calls by a near-extreme margin. This is evidenced by GPRO's Schaeffer's put/call open interest ratio (SOIR) of 1.42, which rests just 3 percentage points from a 52-week high. In other words, options traders have rarely preferred puts over calls by a greater degree, looking at strikes expiring in the next three months.

During the past two weeks, in fact, the strikes seeing the biggest increases in open interest were GoPro's May 9 and 10 puts, adding more than 11,300 contracts total. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) suggests some sell-to-open activity has taken place at the lower strike -- meaning these traders think the $9 level will act as a near-term foothold. By contrast, buyers have targeted the in-the-money 10 strike, suggesting they're hoping for post-earnings downside.

But, as alluded to, the skepticism doesn't stop there. Outside of the GPRO options arena, for example, 30% of the stock's float is sold short. At the equity's average daily volume, it would take over seven sessions to cover these positions. Not to mention, 12 of 13 analysts rate GoPro stock a "hold" or worse.

What have the shares done to deserve such negativity? Well, year-over-year, GPRO stock has surrendered over 31% of its value to trade at $9.13. Plus, on a relative-strength basis, the shares have underperformed the broader S&P 500 Index (SPX) by roughly 19 percentage points over the past three months.

The technical landscape could get even worse after GoPro Inc (NASDAQ:GPRO) earnings, too. In the session following six of the past eight reports, the shares have posted negative returns -- including a 12.7% bear gap in February. Long story short, it's hard to blame the bears for piling on GPRO stock ahead of earnings.

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