Drone Stocks: Can Ambarella Survive GoPro’s Weakness?

Ambarella Inc (NASDAQ:AMBA) will post financial Q4 results after Thursday’s trading session, but experts are not in agreement on how the stock will perform.  Ambarella stock has suffered along with that of it’s biggest client, GoPro Inc (NASDAQ: GPRO) falling nearly 50% in the last six months.

Ambarella, the provider of action cameras, is facing a number of problems driving its price to record lows.   GoPro has had well-publicized problems after posting a loss last quarter, surprising analysts who had expected the company to break even.  While GoPro is counting on the introduction of a consumer drone to help the company regain momentum, they predicted a slow year due to growing competition and slowing demand.

Ambarella suffers from guilt by association: while expected to report revenues of $64.42 million for its current quarter, research firm Pacific Crest cut estimates ahead of the quarterly earnings report due to GoPro’s weak showing.  Pacific Crest  also showed “slight softness in the Drone industry throughout the holiday season” according to Bidness Etc.

ProfitConfidential, however, takes a bullish viewpoint.  Their experts say that the stock has already had their association with GoPro taken out of the stock price, and that some analysts have missed Ambarella’s shift to move their product line beyond action cameras.  Ambarella launched two new chips at the beginning of the year for sports and flying cameras, and reviews are positive, and expected to drive strong demand.

In addition, analysts point out, top drone manufacturer DJI is also one of its clients, which could help Ambarella take a big piece of the drone industry.  Contrary to the experts at Pacific Crest, ProfitConfidential views the drone industry as taking off after the FAA’s registration program, as “drone technology officially went commercial.”

Regardless of your take on the drone industry, Ambarella has other product lines which may open up new verticals for them, such as their security IP chips – which could give them a wedge into the “Internet of Things” (IoT) industry and advanced driver assistance systems (ADAS) which could lead them into a fast growing area of the automotive industry.   The results announced this afternoon may affect the immediate future for the stock price, but in the long run Ambarella may be able to successfully distance itself from GoPro’s problems.