Apple Acquisition Hopes Lift GoPro Inc (GPRO)

FBR said GoPro Inc (GPRO) would make an ideal buyout candidate for Apple Inc. (AAPL)

by Andrea Kramer

Published on Dec 10, 2015 at 11:33 AM

The shares of GoPro Inc (NASDAQ:GPRO) are up 8.6% at $18.35, after the firm launched Apple Watch features for the GoPro iOS app. What's more, analysts at FBR opined that "an acquisition of GoPro would make sense" for Apple Inc. (NASDAQ:AAPL), as "action cameras are uniquely positioned at the intersection of Apple's smartphone, wearables, and multimedia offerings." Plus, the brokerage firm said, GPRO's "new product cycles could open the door to areas where Apple's competitors are investing heavily."

Even with today's surge, GPRO remains more than 70% lower year-to-date. In fact, the stock touched a record low of $16.77 just yesterday, pushing its 14-day Relative Strength Index (RSI) to 24 -- in oversold territory.

Should the stock gain momentum -- or should AAPL actually bid on GPRO -- quite a few shorts could be kicking rocks. Although short interest depleted by 2% during the most recent reporting period, it still accounts for a whopping 47% of the stock's total available float. At GPRO's average daily trading volume, it would take almost a week to repurchase these pessimistic positions.

Option buyers, meanwhile, have picked up GPRO puts over calls at a faster-than-usual clip during the past two weeks. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.65 stands higher than 73% of all other readings from the past year.

Today, in fact, GPRO puts are trading at four times the average intraday rate. However, much of that activity is due to what looks like some kind of spread or roll-out, with big blocks of January 2106 15-strike puts and April 11 puts exchanged.

What's more, GoPro Inc (NASDAQ:GPRO) sports a Schaeffer's Volatility Scorecard (SVS) of 96. In simple terms, the shares have tended to make outsized moves on the charts during the past year, relative to what the options market has priced in -- a boon for premium buyers.

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