GoPro Inc (GRPO) shares tumbled over 30% in after-hours trading following the announcement the company will miss their fourth quarter revenue target and that they will cut 7% of their workforce. The preliminary fourth quarter revenue of $435 million was well below the $511 million estimate and included a $21 million reduction from the price protection HERO4 repricing in December. The company also announced the reduction of 7% of their workforce will cost them between $5-10 million in restructuring expenses.
Price action on the GPRO 240-minute chart shows the bearish trend is firmly in place and that further downside may target the bottom of the bearish channel. If price is able to break below the psychological $10 level, we could see further pressure target the $8.50 area. It is around that area that the formation of bullish ABCD pattern could occur. Point D is targeted with the 261.8% Fibonacci expansion level of the B to C leg. If valid, the reversal pattern could produce a sustained rebound targeting the middle range of the channel.
If the current tumble is short-lived, initial resistance will come from the $13 resistance level.
The Trade: Sell GPRO at $11.50, with a stop loss at $12.50 and a take profit at $8.50. The Risk/Reward Ratio is 1:3