Please ensure Javascript is enabled for purposes of website accessibility

Why Ambarella Inc. Stock Plunged Today

By Steve Symington - Jan 7, 2016 at 4:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The video chip specialist fell along with the broader market. Here's what investors need to know.

What: Shares of Ambarella (AMBA -5.35%) fell as much as 10% late Thursday on no company-specific news. 

So what: For perspective, the NASDAQ Composite Index is currently down a steep 3% today on macroeconomic concerns, so it seems more than anything Ambarella stock is being pulled down along with the broader market. To be fair, though, that's not entirely surprising; the market is still torn, after all, by the fact that Ambarella released strong quarterly results last month but followed with disappointing forward guidance. To blame, according to Ambarella management, were near-term headwinds in the wearable sports camera market.

Now what: But we should also keep in mind Ambarella shares rose modestly Wednesday after the company unveiled an impressive new line of low-power, 4K Ultra HD system-on-chips aimed at capturing the next generation of sports and flying cameras.

In addition, after meeting with Ambarella management this week at CES, Pacific Crest analyst Brad Erickson chimed in to say he believes 2016 consensus estimates are far too low, noting higher-margin drone revenue could account for as much as 20% of next fiscal year's revenue.

In the end, I've made no mystery in recent weeks that I agree with Erickson's sentiment. With shares of Ambarella down 15% over the past year -- and more than 60% below 52-week highs set this past June -- I'm still convinced they're a relative bargain today.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ambarella. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ambarella, Inc. Stock Quote
Ambarella, Inc.
AMBA
$83.66 (-5.35%) $-4.73

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
379%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.