Trade Alert: Kicking out this loser

“Kick out the jams, I want to kick ’em out
So you got to give it up, You know you can’t get enough Miss Mackenzie
Cause it gets in your brain, It drives you insane”  – MC5

All right, let’s deal with this loser GoPro. I’m so mad at myself for ever having flipped from long-time bear to becoming bullish on the stock when it got down into the low and mid- $30s.

My biggest problem with GoPro has always been the management as I’ve written about how they botched their IPO by way underpricing it and then did a secondary that only benefitted selling insiders. In both instances they left on the table hundreds of millions of dollars that should have gone on their balance sheet to help invest in their future to benefit long-term shareholders.

I thought the stock might just be too cheap to ignore for a small trade when it fell into the $30s and was trading at a reasonable multiple to next year’s earnings estimates but I was wrong, especially since next year’s earnings estimates went out the window with the drastic lowering of sales guidance for the year end/Christmas quarter, which the company ballparks now at $500-550MM vs. what the street’s analysts had been estimating to come in at $687MM.

And the most insulting part of the quarterly report? The fact that the company is now going to use $300 million of shareholder money to buyback shares that they just sold to the public at a price, $24 a share, that’s STILL lower than today’s $26 quote. You sold shares to the public just over a year ago and now you’re going to use that cash to buy back shares at a higher price?. That’s 60% of the entire cash balance the company has even as the company has no idea if their business will generate more cash in 2016 at this point — what if sales continue to falter and the company loses money next year?

I noted in the most recent Latest Positions round up that GoPro was my smallest position but that’s little solace given the fact that I should have known better than to have ever gone bullish on this specific name for very specific reasons based on my own analysis. I’m taking my small loss on this loser company and moving on. Mea culpa of the highest order.

Other earnings notes:

SIMO Silicon Motion reported a strong quarter and gave strong guidance and the stock is -2% anyway. I expect the recently heated up semiconductor industry consolidation to continue and this stock is a cheap potential target for any of the dozens of much bigger semiconductor companies out there. I don’t own it as a play on the consolidation per se, but it’s worth recognizing the increasingly strong potential anyway.

Sony’s own performance was one of continued improvement in the company’s fundamentals and continued positioning for better things ahead. The company did guide next year’s revenue estimates slightly lower than consensus but there’s a lot of moving parts and potential for upside to those now lowered estimates as the company grows its smartphone image sensor dominance and monetizes its large TV and movie library. The stock had been on a big rally into the report and is giving back 4% this morning. I’m holding mine steady and am looking for it to continue its ascent since we bought it in the teens on into the $40s over the next year or two.

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