How Ambarella Changed Expectations On GoPro

September 2, 2015

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GoPro Inc (NASDAQ: GPRO) shares have been treading a downward trajectory, after hitting a peak of around $98 a year back.
JMP Securities analyst Alex Gauna maintained a Market Outperform rating for the company, with a price target of $105.
A slowdown in growth at GoPro’s lead supplier Ambarella is expected to have a negative impact on the former’s revenues, Gauna said.

GoPro’s key strategic imaging IC supplier Ambarella Inc (NASDAQ: AMBA) has guided to a slowdown in its growth rate, from 79 percent year-over-year to 37-42 percent year-over-year in the October quarter.

Ambarella also mentioned that its sales into wearables was expected to be down sequentially and year-over-year. Analyst Alex Gauna added, “Although Ambarella results do not necessarily correlate to GoPro given timing, mix, and other customer impacts, the shift is dramatic enough to lead us to decrease our September quarter revenue expectations to flat sequentially.”

Retail and online checks continue to indicate reasonable levels of off-season demand and unique product positioning with little evidence of competitive encroachment, the JMP Securities report mentioned.

GoPro’s shares have lost 31 percent year-to-date, as compared to a 2 percent decline in the Nasdaq. Given this weakness, GoPro’s shares already reflect “the likelihood of near-term sales growth deceleration,” Gauna commented, adding, “[W]e would be buyers of GPRO on any potential weakness in sympathy with AMBA.”