Can GoPro Continue To Be A Hero For Ambarella Going Forward?

Deutsche Bank remains on the sidelines on the shares of Ambarella Inc AMBA, as it is wondering whether the key customer GoPro Inc GPRO would continue to contribute substantially going forward.

Despite reporting better-than-expected third-quarter numbers, shares of Ambarella fell more than 8 percent as inventory concerns weighed on the fourth-quarter outlook, which also missed the Street's view.

Ambarella's Quarterly Gist

• Q3 EPS: $1.11 vs. estimated $0.94.
• Revenue: $100.5 million vs. estimated $97.3 million.
• Q4 Revenue Guidance: $84 million–$87 million vs. estimated $90 million.

Commentary

Ambarella’s lower-than-expected fourth-quarter forecast was attributed to overall seasonality and potential inventory concerns that could hurt revenue in early FY 2018.

Santa Clara, California-based Ambarella, which makes mountable and wearable cameras, expects to have greater visibility after the holiday season.

“Overall, the co’s technology and multiple long-term drivers remain compelling (Drones, IP Security, Computer Vision), but hyper-seasonality in Sports/Wearables leaves us on the sidelines until greater clarity on sell-through/inventory levels emerges,” analyst Ross Seymore wrote in a note.

As such, Seymore maintains his Hold rating and cut the price target to $65 from $68.

The analyst also lowered his fourth-quarter revenue/PF EPS estimate to $87 million/$0.75 from $96 million/$0.89.

At last check, Ambarella stock was down 11.08 percent at $54.59, while shares of GoPro, perhaps in a sympathy move, were down 1.63 percent on the day to trade at $9.66.