Morgan Stanley Analysts Join Us on the GoPro Stock Bandwagon

Keith Fitz-Gerald

"Better late than never" goes the old expression.

Morgan Stanley analysts cut their target price for GoPro stock by 43.5% from $62 a share to $35 a share Tuesday... after the stock had already fallen 67% from its high of $93.85 a share in October 2014.

To say they're in firm command of the obvious is an understatement.

Still, millions of investors were surprised, and the stock got shellacked. It dropped more than 5% before fighting back late day to a close of $30.65. That's simply stupefying to me. Not that it dropped, mind you, but that anybody was surprised.

I've been telling you that the company was a train wreck since before it IPO'd and fell all the way down from its peak over $90 a year ago. In fact, as recently as last week, Sept. 30, I reiterated that the company was not worth your time nor your money - unless, of course, you were shorting it.

GoPro Inc. (Nasdaq: GPRO) is a worse value trap now than ever, and any investor who gets sucked in now is playing with fire.

I know the temptation is to buy, given the chorus of voices telling you that the company is on the "cusp of something great," but hold your ground. The company has always been on the "cusp of something great," and it's never delivered.

Kinda reminds me of the Chicago Cubs... after 107 years without a World Series title, maybe - just maybe - this year will be the year.

Here's why GoPro stock is worth $15 at best and, even then, probably only as an acquisition for a bigger player keen to absorb GoPro technology.

Content + Hype ≠ Profits

I've repeatedly encouraged you to avoid initial public offerings because they're little more than a carefully engineered trap set up by Wall Street and sprung on unsuspecting investors.

We've talked about companies like Shake Shack Inc. (NYSE: SHAK), Zoe's Kitchen Inc. (NYSE: ZOES), FitBit Inc. (NYSE: FIT), and Twitter Inc. (NYSE: TWTR), among others, as examples of what happens when founders get caught up in their own grandeur.

Investment bankers care about perception and hope. They want to lure you in because doing so is worth hundreds of millions in fees to them when an offering is concluded. After that, they don't give a rip; they've made their money.

Investors care about growth, revenue, and company operations. And, when reality doesn't live up to the hype, they have to deal with risks that aren't always apparent during the IPO process.

That's the situation with GoPro.

No doubt the technology is fabulous. The very notion of a small, high-quality camera is like catnip for adventurous souls who want to share their world with others.

Analysts were quick to latch on to that possibility, noting that content creation would feed demand and that demand would, in turn, drive content creation. Everybody wants to share, goes the thinking.

Here's how Goldman Sachs visualized the relationship for clients:

Keith Fitz-Gerald

About the Author

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Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.

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