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Why Ambarella Stock Rose 12% in September

By Demitri Kalogeropoulos - Oct 7, 2019 at 9:43AM

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Second-quarter sales declines weren't as sharp as investors had feared they might be.

What happened

Ambarella  (AMBA -0.53%) shareholders beat the market month as the stock gained 12% compared to a 2% increase in the S&P 500, according to S&P Global Market Intelligence. The rally put the volatile tech stock in significantly positive territory for the year, up more than 60% so far in 2019.

So what

September's boost was powered by surprisingly strong earnings results that Ambarella announced on the last trading day of August. In that report, the video tech specialist said tariffs and trade disruptions weren't hurting the business by much, and that helped sales declines moderate in the fiscal second quarter.

An engineer working on a chip.

Image source: Getty Images.

Now what

Ambarella isn't on a clear path toward sustainable growth, yet. Recent winning tech introductions like the latest computer vision chip lineup is helping to stabilize sales while potentially opening up access to large growing markets over the next few years. But for the 2019 rally to hold, Ambarella is going to have to show that it can add value to its intellectual property while fending off well-capitalized rivals that are all going after the same artificial intelligence space.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ambarella. The Motley Fool has a disclosure policy.

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