In search of millennial melt-ups: GoPro

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A reader recently asked for stocks that might interest younger investors. Instead of responding in private, we wanted to share the results with the entire TradeStation community.

Here are the two criteria given to us:

  • The stocks had to be under $10 a share.
  • The reader only wanted stocks younger investors would recognize. No obscure gold miners or boring insurance companies!

TradeStation’s Scanner went to work and quickly had results. We’ll review them throughout this week on Market Insights.

Now’s a good time for the list because many “millennial” stocks are transforming the economy. Business is moving online, mobile usage is growing and software’s taking over the world. Technology is clearly the most popular sector now. What if there are beaten-down names in the midst of a turnaround, poised to “melt up?”

GoPro (GPRO) is the first that may offer a mix of value and growth. The maker of action cameras dazzled investors after going public in 2014, but ended the next year in a major selloff. By mid-2018 it was down more than 90 percent from its record high.

The problem was an immature business model. The company’s main Hero product was exciting, but had too many variants at the wrong prices. In response, management spent a long time cutting costs, trimming personnel headcount and letting excess inventories work through the system.

Their efforts might be paying off because profit surprised to the upside on May 3. Now they’re looking to refresh key products into the holidays and starting to sell at big merchants like Target (TGT) and Wal-Mart Stores (WMT) in the current quarter.

GPRO may look cheap because it’s valued at less than 1x sales — a ratio could be especially important if margins keep improving. (If they make more profit per dollar of revenue.) Short interest also account for more than one-fifth of its float. If more good news keeps trickling out, those bears could be forced to “cover” and squeeze the stock higher.

Bottom line: This isn’t a trade recommendation and everyone needs to do their own homework. But GPRO could have a ton of bad news in, with prospect of a meltup if business rebounds.

GoPro (GPRO) chart this year.
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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.