Ambarella: Zacks’ Bear of the Day Play

Ambarella (AMBASnapshot Report) recently reported earnings and beat the Zacks Consensus Estimate. Despite that beat, estimates have moved lower and the stock has slipped to a Zacks Rank #5 (Strong Sell) and today it is the Bear of the Day.

The Numbers

AMBA topped the Zacks Consensus Estimate of $0.27 by $0.06 for a 22% positive earnings surprise. Revenues came in a little above expectations at $68 million for an 4.8% positive revenue surprise.

Description

Ambarella makes semiconductor processing solutions for video that enable high-definition (HD) video capture, sharing, and display worldwide. Ambarella, Inc. was founded in 2004 and is headquartered in Santa Clara, California.

Earnings History

Usually when a stock is the Bear of the Day, the earnings history is filled with misses. I see only one miss in the last seven reports, which makes the earnings history for AMBA rather strong.

Estimates

Here is the real reason the stock is a Zacks Rank #5 (Strong Sell) and the Bear of the Day. The Zacks Consensus Estimate has fallen in each of the last three months. The FY17 estimate stood at $2.13 in January but fell to $1.93 in February and is now down to $1.61 in March. That is a dramatic fall in just three months.

Next year is seeing an even larger move to the downside., with numbers sliding from $2.86 to $2.20 down to $1.46 over the same time period as mentioned above. That is the reason this stock is a Zacks Rank #5 (Strong Sell).

Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #5 (Strong Sell) we see that estimates are moving higher.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.

Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.

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