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Why Ambarella Inc's Shares Popped 17% Last Month and Why the Pop Didn't Last

By Travis Hoium - Mar 12, 2016 at 6:41AM

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Analysts helped drive Ambarella Inc higher, but the pop didn't last.

GoPro relies on Ambarella technology to make its cameras work. Image source: GoPro.

What: Shares of video technology company Ambarella Inc (AMBA 3.85%) jumped 17% in February as investors took a bullish outlook ahead of earnings. Ironically, earnings disappointed and shares have fallen in early March to about the same level they started February.

So what: Ambarella customer GoPro has really been the thorn in Ambarella's back lately after it saw sales decline in the fourth quarter, something that heavily impacts Ambarella. But analysts saw bullish signs about GoPro's future as well as new products, with Stifel and Dougherty both upgrading Ambarella in the month of February.

Now what: The upgrades helped in February, but earnings came out on March 3 and they left investors disappointed. Revenue was $68 million last quarter and fiscal-first-quarter revenue is expected to fall to $55 million-$57 million. And net income dropped 71% to $5.1 million, so challenges for customers are certainly impacting results. It could be a rough year for the video technology company if customers don't see growth and I'd read more into earnings trends in March than the analyst-driven pop in February if I were looking at buying the stock. 

Travis Hoium owns shares of GoPro. The Motley Fool owns shares of and recommends Ambarella and GoPro. 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.

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Stocks Mentioned

Ambarella, Inc. Stock Quote
Ambarella, Inc.
$91.05 (3.85%) $3.38
GoPro, Inc. Stock Quote
GoPro, Inc.
$6.64 (-1.77%) $0.12

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