Ambarella Inc (NASDAQ: AMBA)

Ambarella is having a rough time in the market today. The declines started in after-hours trading yesterday after the company reported earnings. While the previous quarter's results were positive, investors seem to be concerned with guidance. Today, we'll talk about what we saw from earnings, how AMBA is reacting to the news, and why I'm not in the least bit concerned about today's declines. So, let's get right to it.

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What We Saw From AMBA Earnings

As mentioned above, Ambarella reported its earnings for the fiscal fourth quarter of 2016. While earnings were overwhelmingly positive, AMBA is falling as the result of poor guidance. Here's what we saw from the report:

  • Earnings Per Share – In the quarter, AMBA absolutely blew away expectations with regard to earnings per share. While analysts expected the company to produce earnings in the amount of $0.48 per share, the company actually reported earnings in the amount of $0.64 per share.
  • Revenue – Revenue also came in well ahead of expectations. During the fourth quarter, analysts expected the company to produce revenue in the amount $65 million, but the company actually produced revenue in the amount of $68 million.
  • Guidance - Unfortunately, weak guidance is concerning AMBA investors. AMBA expects to report revenue of $55 million to $57 million for the first quarter, below estimates of $62.44 million.
As you can see from the information above, the AMBA earnings report was relatively positive. Unfortunately however, guidance has led to fear. In a statement, Fermi Wang, CEO of Ambarella, had the following to say with regard to the results from the quarter:

During the fourth quarter we saw strong sales from professional IP security, automotive aftermarket, home monitoring and flying camera markets... This was largely offset, however, by a continued decline in the wearable sports market.”

How The Market Reacted To The News

As investors, we know that the news moves the market. Any time there is positive news with regard to a publicly-traded company, we can expect to see gains. Adversely, when negative news is released, we expect to see losses. While earnings were overwhelmingly positive, guidance was the key that led to fear. As a result, we're currently seeing declines on the stock. Currently (10:04), AMBA is trading at $43.26 per share after a gain of $2.98 per share, or 6.44%, thus far today.

Why I'm Not Concerned About The Declines

While poor guidance has led to investor fears, and ultimately, declines in the value of AMBA, I have to say that I'm not concerned at all. In fact, I still have a relatively bullish opinion of what we can expect to see from the stock moving forward. Unfortunately at the moment, wearable camera sales are declining, and AMBA is largely looked at as a producer of chips for these cameras. However, AMBA computer chips are being used in so many other ways now. The company's chips are being used in drones, infotainment systems, driverless car experiments, home security, and more. All in all, regardless of what happens in the wearable camera market, chances are that demand for AMBA products will climb! So, while we may see declines in the short term, I'm expecting to see long-run gains.

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What Do You Think?

Where do you think AMBA is headed moving forward? Let us know your opinion in the comments below!

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Hey everyone, I'm Joshua Rodriguez. I'm the founder of CNA Finance as well as several other sites. If you'd like to connect with me, follow me on or Twitter! I'd love to see ya there. Also, if you're looking for top quality content for your blog, news outlet, or any other website for that matter, please reach out to me at Info@CNAFin.com! Legal Disclaimer - CNA Finance is NOT an investment advisor. All investment decisions should be well thought out and made with the help of a an investment advisor. For our full legal disclaimer, please scroll to the bottom right of this page.

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