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Sluggish GoPro ( GPRO ) sales will force Ambarella ( AMBA ) to cut its fiscal 2017 guidance from earlier views for 15%-20% growth, a Needham analyst predicted Friday after the chipmaker late Thursday posted mixed Q4 results and disappointing Q1 guidance. Ambarella stock was down 9.5% in afternoon trading on the stock market today , below 42. GoPro stock was down more than 2%. Ambarella makes key chips used in GoPro’s Hero action cameras. Ambarella reported $67.97 million in sales and 64 cents earnings per share ex items, up 5% and down 6% year over year, respectively, for its fiscal Q4 ended Jan. 31. Sales topped the consensus model of 12 analysts polled by Thomson Reuters for $65.8 million and Ambarella’s own guidance for $65 million to $67.5 million, but EPS lagged expectations for 68 cents and declined for the first time in 18 quarters. Ambarella ended the year with $316.4 million in sales and $3.31 EPS ex items, up 45% and 66%, respectively. Both metrics beat the consensus for $313.6 million and $3.05. But Ambarella’s outlook is “messy” at best, Pacific Crest analyst Brad Erickson wrote in a research report. Erickson cut his price target on Ambarella stock to 62 from 72, but he kept his overweight rating. For Q1, Ambarella guided to $55 million to $57 million in sales, down 21% at the midpoint vs. the year-earlier quarter. It would be Ambarella’s first year-over-year decline in 18 quarters. Ambarella cut its GoPro exposure to low single digits until it refreshes its wearable sports camera line, likely in October, Erickson wrote. Overall, wearable cameras should account for a mid-teen-percentage of sales in Q1, Ambarella CFO George Laplante said Thursday on the company’s earnings conference call. The expected GoPro refresh, combined with strong seasonal IP security and drone sales, “should drive a return to year-over-year growth,” Erickson wrote. During Q4, China — which generally contributes heavily to IP security camera sales — was flat sequentially, Needham analyst N. Quinn Bolton wrote in a report. The IP security, drone and automotive segments all posted strong year-over-year growth, Bolton said. “But the consumer portions of these segments declined quarter over quarter,” he wrote. “As expected, wearable sports cameras declined substantially year over year and quarter over quarter.” Ambarella is shifting focus to the consumer and China professional IP security camera markets, where analysts say profit margins tend to be low. Quinn maintained his hold rating on Ambarella stock, noting cloudiness surrounding the China market. Scalper1 News
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