Ambarella Tanks After Weak Guidance

Joel Elconin is the co-host of Benzinga's #PreMarket Prep, a daily trading idea radio show.

Ambarella Inc AMBA shares were trading lower by $11 (12 percent) at $78.61 in Wednesday's session. Despite a solid Q2 beat for EPS ($0.88 vs. $0.81 estimates) and sales ($84.2 million vs. $81.7 million), the Street is focusing on weaker guidance moving forward.

After a sharply lower open ($82.60 vs. Tuesday's close of $89.61), it managed a brief bounce before resuming its decline. So far, it has taken the issue to $75.01 before rebounding to its current level. That is still $4 above the low last Monday when it swooned to $71.

Well-known short seller Citron Research, who targeted the issue when the issue trading near the $120 level, is using today's decline to cover its position. In a tweet, the company sees better opportunities elsewhere.

Today's decline is taking place on much heavier than average volume. So far, it has traded 6.6 million shares compared with its 20-day average of 3.62 million, with over three hours remaining in the session.