GOPRO SHARES COULD GIVE BULLS A NICE PRESENT FOR THE HOLIDAYS

GoPro, Inc. A

shares are the darling of the risk junkies and the plaything of many a day trader. Can the company's cool niche market create enough fundamental fire power to boost the stock through several layers of technical resistance that exist right now? Let's take a look.. What the bulls see in GoPro… • A bullish technical set-up (see below) • 4% net profit margins that spin off $110 million an positive levered free cash flow annually • Zero debt and $239 million in cash equivalents What the bears see in GoPro… • Very expensive valuation metrics: o A price-to-book ratio of 26.8 o A price-to-sales ratio of 8.51 o A market capitalization of $9.71 billion that trumps the enterprise value of $9.31 billion o A PE of over 60 versus estimated 2015 revenue and EPS growth of 23.7% and 22.8% The technical take on GPRO… Technicians note that GoPro shares appear to be in the early stages of wave “c” of an “abc” upside correction that will comprise wave “B” of an “ABC” downside correction. That means the technicians are expecting a bit more upside (to the $89.20 to $94 range) before another leg lower commences. That down leg could take GPRO down to the $60 to $70 range. Overall… At Sea Change, we are nimble enough to trade GPRO from the long side here in anticipation of the remainder of the short-term rally playing out. We will be exiting longs at $89.20 and then sniffing around on the short side if GPRO reaches $94. Longer-term investors in GPRO may want to lighten up on longs at $94 and look to re-enter on the long side if the stock pulls back to $70.