What happened
Shares of Ambarella (AMBA -0.61%) are down 30.4% as of 11:57 a.m. ET Tuesday following Monday's post-close release of its fiscal fourth-quarter results. While earnings topped estimates, guidance for the quarter now underway was disappointing.
So what
For the three-month stretch ending in January, Ambarella turned $90.2 million worth of revenue into an operating profit of $0.45 per share. Both compare favorably to the year-ago figures of $62.1 million and $0.14 per share, and earnings topped analysts' expectations of $0.42 per share. Sales merely met expectations, though, and the company's outlook for fiscal Q1 is a letdown.
Image source: Getty Images.
The specifics: Forecasted revenue of between $88.5 million to $91.5 million compares unfavorably to analysts' consensus estimate of $90.9 million. Ambarella also believes gross profit margins will contract, from the fourth quarter's 64.8% to somewhere between 63% and 64%.
CEO Fermi Wang commented on the results and guidance, saying, "We continue to face headwinds, including geopolitical, public health, and persistent supply chain challenges." But he remained upbeat, adding, "Nevertheless, we believe we are now decisively established in front of the positive AIoT [Artificial Intelligence of Things] secular trends." Investors as a whole aren't as confident.
Now what
The sheer scope of today's plunge is tempting to bargain-minded investors. The sell-off seems emotionally charged and fear-based, which often sets up a strong rebound.
This is not a market environment where one can be blindly bold, though. Aside from the fact that the company's new computerized vision technology focus is a nascent, fluid opportunity with a still-fuzzy future, escalating military conflict in Ukraine presents a wide variety of potential problems for all companies. The more speculative of them -- like Ambarella -- are at particularly heightened risk against the current global backdrop.
In other words, while it's too late to sell, it's too soon to buy.
