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Why Ambarella Stock Dropped 18% in March

By Demitri Kalogeropoulos – Apr 8, 2020 at 9:59AM

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The tech stock's latest fiscal year was marred by flat sales and expanding losses.

What happened

Ambarella (AMBA -2.41%) shareholders underperformed the market last month. The stock declined 18% compared to a 12.5% dip in the S&P 500, according to data provided by S&P Global Market Intelligence.

That result pushed the stock back below the wider market so far in 2020, with shares down 18% compared to the S&P's 16% drop.

A man works behind a computer screen.

Image source: Getty Images.

So what

Investors weren't excited about the video tech specialist's latest operating update. Revenue rose 12%, and gross profit margin worsened to 58% of sales from 60% a year ago. Net losses over the past year expanded to $45 million from $30 million as revenue held steady. 

Now what

CEO Fermi Wang and his team acknowledged rising uncertainty around the COVID-19 pandemic in early March but suggested the company's new AI and computer vision chips could still help the company return to a faster growth profile in fiscal 2021, which began in February. Yet that target only became more challenging as economic growth rates have slumped in key markets such as Europe and the U.S. in recent weeks.

Without a clearer path toward rising sales and sustainable profits, Ambarella stock is likely to remain under pressure on Wall Street.

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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