If there's one painful lesson that Ambarella (NASDAQ:AMBA) shareholders keep learning, it's that beating Wall Street expectations isn't enough. The provider of low-power, high-def video compression and image processing solutions tumbled 20.3% last week, taking a hit after offering up uninspiring guidance. At least two analysts downgraded the stock after Thursday afternoon's report, with another pair of Wall Street pros slashing their price targets. 

This is the fifth quarter in a row that Ambarella's stock took a big hit on earnings despite blowing past analyst profit targets. It's been a rough run for the stock that was a market darling a couple of years ago. Ambarella stock hit a new 52-week low on Friday. 

An Ambarella chip mounted.

Image source: Ambarella.

Chip shots

Ambarella's fiscal second quarter was solid. Revenue rose 10% to hit $71.6 million, well ahead of the $69 million to $72 million that it was targeting three months ago. The chipmaker's adjusted profit of $0.48 a share landed well ahead of the $0.44 a share that analysts were modeling. The near future is where things get hairy.

Ambarella is forecasting $87.5 million to $90.5 million in revenue for the fiscal third quarter, which at the low end would be flat with the prior year's showing. The fourth quarter will be brutal. Ambarella is lowering its full-year forecast, eyeing revenue to decline between 3% and 7% for the year. If revenue has climbed 11% through the first six months of the fiscal year and the third quarter will tread water, the fourth quarter will be spectacularly awful to send top-line results the wrong way for the entire year.

Ambarella stock took a 13% hit the week of its first-quarter results, and that was when it warned of flat top-line guidance for the entire year. Now it's aiming even lower.

Gross margin was already sliding this year, and weakness continues in the drone business that was supposed to be a major growth catalyst. Ambarella's leadership in wearable cameras, security gear, and dashboard cameras isn't enough. Its push into robotics and factory-installed automotive equipment is still a work in progress. There's general market excitement about Ambarella's push into computer vision products, but that niche is still a gray question mark.

Richard Shannon at Craig-Hallum and Suji Desilva at Roth lowered their respective ratings from bullish to neutral. Weakness in the drone market and Ambarella boosting its investments in computer vision chips will weigh on near-term results. Both analysts lowered their price targets on the stock. They are joined by Deutsche Bank and Morgan Stanley analysts who also lowered their price goals on the stock, but at least they stuck to their current ratings. 

Ambarella stock has taken a double-digit hit in back-to-back quarters. The stock has fallen by at least 4% the day after posting fresh financials in each of the past five quarters. The trend and stock chart aren't kind with the stock at new 52-week lows, and now it's up to Ambarella to give investors a good reason to buy back into the former growth stock darling.