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Ambarella's Stock Is Plunging And Taking GoPro With It

Ambarella's Stock Is Plunging And Taking GoPro With It

Shares of Ambarella Inc (NASDAQ: AMBA) plunged more than 12 percent Wednesday morning after the company's second-quarter print contained a weak third-quarter forecast for wearable-camera revenue.

Investors and traders took Ambarella's poor guidance as a bullish sign for the wearable-camera segment and punished GoPro Inc (NASDAQ: GPRO)'s stock.

Here is a roundup of what Wall Street's top analysts are saying about Ambarella and GoPro.

Pacific Crest: GoPro Refresh, Drones Likely Coming

Brad Erickson of Pacific Crest commented in a note that Ambarella's October quarter outlook actually "demonstrated" GoPro's strong channel-fill strategy ahead of the holiday shopping season.

Erickson continued that Ambarella's GoPro October-quarter forecast is around flat on higher units being more than offset by a mix shift. In fact, the analyst suggested that the difference between Session and HERO4 pricing appears to be as much as 40 to 50 percent year-over-year.

Related Link: Options Strategist: GoPro Is Targeting $35/Share

Erickson also added that he spoke with Ambarella's management team and he is "confident that there has been no socket loss" at GoPro. As such, he sees the likelihood of further stock declines being "more limited."

The analyst also suggested that GoPro's timing and product mix affected Ambarella's poor guidance, but the rest of the business is growing at a rate of more than 60 percent per year.

Looking forward, a GoPro refresh is likely coming in the first half of 2016, which should benefit Ambarella while a GoPro drone would "offer further upside."

Shares of Ambarella remain Overweight rated with an unchanged $123 price target.

Piper Jaffray: Ambarella's Q3 Commentary Negative For GoPro

Erinn Murphy of Piper Jaffray commented in a note that Ambarella's third-quarter commentary suggests that there is a "very low" chance of a HERO5 launch this year.

Murphy noted two "important clarifications" management offered during its conference call:

  • 1) flying camera revenue is expected to rise from the second quarter
  • 2) wearable camera sales are expected to be down sequentially and lower year-over-year

The analyst continued that while management didn't get into the "nuance" of sell-through rates on the call, her checks suggest GoPro's Session has been "slower to build." As such, a potential change in timing of new product launches this next versus last year could ultimately prove to set up for a "challenging" fourth quarter comparison.

Murphy also noted that according to the U.S. Patent & Trademark website, GoPro registered the name "Karma" (in mid-August) for what might be ascribed to its quadcopters. As such, this category could prove to be a "significant" opportunity for GoPro.

Shares of GoPro remain Overweight rated with a price target lowered to $54 from a previous $72.

JMP Securities: Ambarella's Results ‘Do Not Necessarily Correlate' To GoPro

Alex Gauna of JMP Securities commented in a note that Ambarella's results "do not necessarily correlate" to GoPro given timing, mix and other customer impacts, the shift is "dramatic enough" to result in lowered expectations for GoPro's September quarter with revenue expectations to be flat sequentially.

Gauna explained that internal retail and online checks continue to point toward "reasonable" levels of off-season demand activity and "unique" positioning with "no significant evidence" of competitive encroachment.

Guana added that the company "would be buyers" of GoPro and the 31 percent year-to-date decline in GoPro's stock "more than prices in" the likelihood of near-term sales growth deceleration.

Finally, Guana continues to recommend that investors pay attention to the 70 percent increase in global brand awareness GoPro reported last quarter, along with the key investments it is making in people, software, media, sponsorship, virtual reality and real-time live broadcast. As such, the company is "another league" relative to its competition and "sets up almost open-ended potential" to monetize the Hero brand.

Shares of GoPro remain Market Outperform rated with an unchanged $105 price target.

Image Credit: Public Domain

Latest Ratings for AMBA

Feb 2021Deutsche BankMaintainsHold
Jan 2021Roth CapitalUpgradesNeutralBuy
Jan 2021Roth CapitalMaintainsNeutral

View More Analyst Ratings for AMBA
View the Latest Analyst Ratings


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