Shares of video solutions semiconductor company Ambarella (NASDAQ: AMBA) took a hit on Wednesday, declining as much as 13.8%. As of 11:34 a.m. EDT, the stock was down 12.9%.
The stock's decline follows a note from Morgan Stanley analyst Joseph Moore (via Bloomberg) saying Chinese video surveillance companies that are clients of Ambarella are at risk of being placed on a U.S. blacklist amid trade tensions between the two countries.
Image source: Getty Images.
Chinese video surveillance company Hangzhou Hikvision Digital Technology, which Moore estimates makes up between 16% and 19% of Ambarella's total revenue, is at risk of being blacklisted, the analyst argued. Another Ambarella customer at risk is Zhejiang Dahua Technology, the analyst said.
Ambarella's security camera revenue represented about 50% of total revenue in fiscal 2019, the company said in its fiscal fourth-quarter earnings call.
Investors should look for Ambarella management to address these concerns in the company's fiscal first-quarter earnings call on June 4. In addition, if Moore is right about this risk, it may be reflected in the company's revenue guidance provided in the upcoming quarterly update.
10 stocks we like better than Ambarella
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Ambarella wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of March 1, 2019
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.