AMBA Down Off GoPro Q4 Warning

GoPro revises Q4 guidance below initial forecasts:

GoPro (NASDAQ:GPRO) expects to report Q4 revenue of $435M, below prior guidance of $500M-$530M and a $511.9M consensus. The company blames weaker-than-expected camera sell-through at retailers, particularly for the first half of Q4.

Excluding “the impact of price protection” and a $30M-$35M charge, non-GAAP gross margin is expected to be between 44.5%-45.5% vs. prior guidance of 46% (+/- 50 bps). Including the aforementioned factors, GM is expected to be in a 34.5%-35.5% range.

GoPro is cutting 7% of its 1,500±employee workforce; $5M-$10M in restructuring costs are expected. Entertainment chief/SVP Zander Lurie has resigned from his position, and is joining the board.

GoPro remains halted; video processor supplier Ambarella (NASDAQ:AMBA) has fallen to $42.01 after hours. GoPro’s Q4 results arrive after the Feb. 3 close.


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A couple thoughts about AMBA.

First, in GPRO’s press release today, they said the first half of the quarter was the worst for them:

Fourth quarter revenue reflects lower than anticipated sales of its capture devices due to slower than expected sell through at retailers, particularly in the first half of the quarter. (bolding mine)

AMBA’s last reported quarter (fiscal Q3 2016) ended Oct 31, so it already included the first 1/3 of the quarter GPRO just warned about. And by the time the call was held on Dec 3, the worst would have been past. So when management said that they’ll be able to hold revenue more-or-less flat YoY even with GPRO’s woes, I think there’s reason to believe that those estimates will at least be in the ballpark.

The fact that they believe they can keep revenue flat YoY without substantial help from GPRO just goes to show, in my opinion, how far AMBA has come. Yes, without GPRO there might not be much revenue growth this year, but AMBA’s other streams of revenue are growing fast and will likely continue to do so over the coming years, and they continue to move into new verticals. If GPRO does return to the party at some point (they will be releasing a new model this year), then that’s a nice bonus for AMBA.

As of the latest reported quarter, AMBA has $276.7 million in cash and marketable securities. With just over 32 million shares outstanding, that’s about $8.64/share just in cash. That’s nearly 22% of the current $39.65 (after-hours) share price.

All in all, AMBA seems priced as if it’s best days are long behind it. This year may be flat depending on whether GPRO gets its act together or not, but looking beyond that I think the future is clearly bright.

Just my opinion, of course. Everyone should do their own due diligence.