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Ambarella: Market Expects Too Much From FQ3 Guidance

Summary

Ambarella is scheduled to report FQ2 earnings after the closed on September 1.

The stock has rallied over 100% off the lows in part due to excitement over the release of two key products my previous top customer GoPro.

Without the GoPro products shipping, the market is bound to face disappointment over the guidance for FQ3.

Heading into FQ2 results on Thursday after the market closes, Ambarella (NASDAQ:AMBA) is steamrolling ahead. My research back in early March recommended that investors grab the stock on any dip to $35. The stock ironically hit $35.26 on May 13 before this huge rally.

Ambarella became interesting due to the shift beyond a reliance on struggling GoPro (NASDAQ:GPRO). The image processing semiconductor is more levered to the growing demand for action cameras rather than any particular manufacturer. The expected release of two major products during the holiday season by GoPro has Ambarella surging into the quarterly results whether rational or not.

The prime reason that Ambarella became intriguing around $35 is the shift in the customer base to drones, security cameras, and other action camera manufacturers. The reduced reliance on GoPro even in the action camera segment provided a solid base into the future.

As an example, the company is generating quarterly revenues in the $60 million range even without a meaningful contribution from GoPro. Now the prime customer is finally back in business going into this holiday season.

GoPro...


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