×

Why traders are playing GoPro for an extreme rally

GoPro shares have fallen 15 percent in the past month, and dropped 1.6 percent on Monday even after the announcement of its newest and smallest camera. But according to some analysts and technicians, that could provide an opportunity to get into the hot stock.

"It's a classic uptrend with a pullback to the 50 percent retracement," TradingAnalysis.com's Todd Gordon said Monday, referring to a level at which the stock has retraced, or given back, half of its gains.

According to Gordon's analysis, this could be just where the selling stops.

"Technically, it's a good setup," he said.


Some analysts also tend to be bullish about the stock, which closed at $50.94 a share on Monday. The most common rating on the stock is "overweight," and the average analyst price target on the stock is about $68, according to FactSet. Some, like Alex Gauna of JMP Securities, are far more bullish than that.

Discussing the new device on CNBC's "Power Lunch," Gauna said the bottom line is that "the GoPro brand and product line are going to continue to expand, and that's why it's an interesting stock and company."

He pins the stock's recent decline on a combination of "macro concerns" and seasonality, given that investors will have more visibility on the company as holiday shopping approaches.

"We think it's going to be another banner year for GoPro," said Gauna, who has a target of $105 on the stock.

Nick Woodman, CEO, GoPro, showing the Hero4 Session
John Chiala | CNBC
Nick Woodman, CEO, GoPro, showing the Hero4 Session

Other analysts remain more cautious.

"The Session camera strengthens GoPro's dominant competitive positioning in the action sports category, but we do not believe it expands the market to new users, based on features or price point," Stifel analyst Jim Duffy wrote in a note Monday.

Duffy goes on to say that after assessing several different valuation metrics, "our summary view is that, balanced against execution risks, there is insufficient upside potential to justify a Buy rating."

Of course, poring over the books may not be the best way to call the move in such a volatile stock.

"At the CIO level, they spend significantly less time on this and they just go with the chart one way or the other," Neil Azous of Rareview Macro said in a Monday "Trading Nation" segment. "They let the chart, as Todd might say, dictate their mentality as whether to be long or short, and spend a lot less time on the fundamentals."

"So when I think about a situation like this, the most upsetting situation is that it actually goes sideways and nobody has a lot of fun in it," Azous concluded.

Of course, as a glance at the chart confirms, that hasn't quite happened yet for this volatile stock.