2 High Flying Stocks That You Should Sell

Many weak performing stocks have recovered over the last few months and have been in a rally mode for quite some time. However, in many cases, the rally was driven by hype, and not fundamentals, which is why I think investors should exit such stocks. The two stocks that perfectly fall under this category are Advanced Micro Devices (AMD) and GoPro (GPRO).

After having a few troubled years, Advanced Micro Devices performed really well this year, jumping over three times from its 52-week lows.
The company reported 9 percent yearly sales growth, which was primarily fueled by strong demand for its semi-custom SoCs for gaming consoles.

On the other hand, Advanced Micro Devices also launched its new Polaris architecture to design new graphics cards. The company launched RX 480, first graphics card based on Polaris architecture, priced at just $199, specifically for mainstream users. It was the company’s strategy to appeal to mainstream users to claw back some market share from NVIDIA.

However, that strategy backfired as later it was found that RX 480 draws more power from the PCIe slot compared to the rated power that destroyed motherboard.
2 High Flying Stocks That You Should Sell
Image by ciupa / Pixabay
Not only this, but just 2-3 weeks later NVIDIA also launched its new graphics cards GTX 1060 with 6GB RAM and 3GB RAM, priced at $250 and $200, respectively.

Moreover, as per thousands of benchmarks on User Benchmark, NVIDIA’s GTX 1060 is 11 percent faster compared to RX 480, along with 15 percent higher all-around performance. As a matter of fact, the reason why Advanced Micro Devices lacks compared to NVIDIA is that NVIDIA has a lot to cash to spend on R&D sector, and thus it manufactures more efficient products compared to Advanced Micro Devices.


GoPro yearly sales growth has been declining at a progressively rapid rate with each passing year. As a matter of fact, amid 2014 and 2015, the company’s revenue growth rate declined by more than more than 50 percent. Though it is sensible for a company’s growth rate to slow as its sales base surges, the hastened rate of drop was a cause for concern.

When the above case is linked to GoPro, it suggests that the company’s cameras could be approaching a saturation point in terms of adoption, and could also specify that management seems to be struggling with expressively increasing the addressable market for its action cameras.

Moreover, the company’s management projects this year's revenue to fall in the range of 10 percent to 17 percent. Apart from this, the company has strategized to enter in the drone market. However, the drone market is crowded with many small and large companies which offer very cheap products.

GoPro will face tough competition in the drone from market leader DJI Innovations; therefore it is going to be very difficult for the company to grasp a strong position in the drone market. GoPro delayed the launch of its first drone Karma, maybe because it wasn’t competitive enough. Whatever be the issue, the company’s delay reflects pitiable management ability to accomplish and set opportunities.

GoPro has rallied recently due to the Karma-hype, but I think investors should be selling the stock at this point.
Published on Sep 22, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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