When you are facing a technical problem that is harming your business and your engineers cannot find the answer you call Microsoft for help.
This stock appears to have hit bottom after bad earnings and bad guidance. Time for a dip buy?
NEW BULLISH Plays
GPRO - GoPro - Company Profile
GoPro is the number one action camera maker and created the current market. They moved from a simple camera maker to a content creator over the last couple years. At least that is what they wanted people to believe so that their sky high PE would be based on something other than simply a hardware company.
Fast forward to 2015 and 5-6 companies began to compete with action cameras of their own. GoPro's market share began to dwindle. A botched roll out of a new model in Q3 and two prices cuts in Q4 has knocked their share price down from $65 in August to $9 on Thursday.
One of the problems that GoPro has been unable to conquer is the relatively hard method to recover, edit and publish videos produced by the cameras. They have promised new software for a couple years and it never seems to arrive or fails to satisfy when the updates appear. This is a drag on future camera sales because you have to be a geek to produce any quality videos.
News broke today that GoPro had licensed its video technology, certain file storage and other system technologies. While the details are still unclear this could be a Hail Mary pass to Microsoft for help with their software problems. If it is not related to that then there is something else going on that could provide a boost for GoPro in the future.
Lastly, the drop in market cap from $8 billion to $1 billion makes them a very attractive acquisition target for somebody like Sony or even Under Armour. Microsoft could buy them with their pocket change.
Shares appear to have bottomed at $10 but just in case we can buy a March $10 put as protection for 97 cents. This means we have unlimited upside and almost zero downside risk. If somebody makes an offer for GoPro I would expect it to be $15 or more simply because the company is not in financial trouble. They currently has no debt and $474 million in cash. They just need to get over this technical problem and they will be fine.
Buy GPRO shares, currently $10.99, no stop loss.
Buy March $10 put, currently 97 cents.
Net debit $11.96.
NEW BEARISH Plays
No New Bearish Plays