63% Crash In 11 Months: Citron's GoPro Short Thesis Is Playing Out

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  • Since Citron Research tweeted about GoPro Inc GPRO being a short candidate, the stock has declined from $93 to $33, or 63 percent.
  • Shortly after that tweet, Citron issued a "Snapshot" that slapped a $30 price target on the stock "within 12 months."
  • The analysts debunked GoPro's "hardware plus media story" and highlighted a "gap between the most optimistic conceivable valuation that this company can ever command, and the current stock price."

In that research note, Citron cautioned that tech hardware device companies "have a brutally difficult time maintaining consistently high margins." The analysts compared GoPro to Beats headphones – a company that Citron said was just as recognized as GoPro. Apple Inc. AAPL paid just 2x revenue for Beats – a move that analysts at the time called "reasonable."

Using that as a benchmark, Citron forecasted out GoPro's revenues to 2017 – which it pegged at $2.1 billion. From there, a multiple of 2x revenue puts the stock price at $33.60, basically where shares closed on Wednesday. Citron called this price-to-sales the "only fair" comparison for any "rational investor."

Instead, Citron Research said that GoPro's stock appreciation was purely the result of "Wall Street's typical small-float, large outstanding, IPO game."

Though they pegged a $30 price target on the stock, Citron said that the stock would be "fortunate" to maintain that price in the long term. In conclusion, Citron warned: "GoPro will be forced to innovate to compete in a brutally competitive camera market, where household names like Polaroid an Kodak ended up in bankruptcy, iconic names like Nikon and Canon went from mainstream to niche, and FlipCam simply disappeared into thin air."

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Posted In: Analyst ColorShort IdeasTop StoriesAnalyst RatingsMoversTechTrading IdeasCitron Research
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