HomeGoPro Supplier Ambarella, Qualcomm Set For Drone Duel

Share to Share on FacebookShare on Google+Tweet about this on Twitter

Qualcomm (NASDAQ:QCOM), Broadcom (NASDAQ:BRCM) and Texas Instruments (NASDAQ:TXN) could mount an assault on GoPro (NASDAQ:GPRO) chip supplier Ambarella‘s (NASDAQ:AMBA) robust drone sales, Needham analyst N. Quinn Bolton wrote in a research report Friday.

And, as GoPro sales slough off despite holiday season shopping, Ambarella will be more dependent on robust drone camera, IP security camera and dash camera sales to stave off “competition from traditional semiconductor manufacturers,” Bolton wrote.

Ambarella stock seesawed on the stock market today, but shares were down almost 3% in afternoon trading, after the company late Thursday gave weak guidance.

IT12-AMBA-1207-company.jpg

For the current quarter, Ambarella guided for $65 million to $67.5 million in sales, falling far short of Wall Street expectations for $76.3 million. Sales would be up 2.4% at the midpoint, indicating Ambarella’s slowest year-over-year growth since July 2011.

The poor guidance followed a stellar beat. For fiscal Q3 ended Oct. 31, Ambarella reported $1.08 earnings per share ex items on $93.2 million in sales, up 59% and 42%, respectively, vs. the year-earlier.Analysts had expected 86 cents and $90 million. Three months ago, Ambarella guided for $90 million to $93 million.

GoPro Weakness To Continue

Yet Q3 was plagued by a sharp decline in wearable sports camera revenue, which fell vs. the year-earlier quarter and sequentially. IP security camera, drone and dash camera sales, on the other hand, buoyed Q3.GoPro inventory has built up significantly, Ambarella CFO George Laplante told analysts.

“In the wearable sports camera market, high customer inventory levels at the end of calendar Q3 are extending into Q1 of fiscal 2017,” he said.Laplante guided to 15%-20% year-over-year revenue growth for fiscal 2017, which ends Jan. 31, 2017, compared with the company’s overall 20%-25% growth goal. He anticipates better wearable sales in the second half of 2017, when GoPro is expected to release its Hero 5 camera.

FBN analyst Shebly Seyrafi cautioned patience on Ambarella stock. He maintained his outperform rating on Ambarella but cut his price target to 70 from 110.”GoPro, and therefore Ambarella, will benefit in (the second half of calendar 2016) with the release of a Hero 5,” he wrote in a research report. “So, investors need to be patient for now.”