Personal Finance

Why Ambarella Stock Jumped Today

Ambarella chips.

What happened

Shares of video compression and image processing chip company Ambarella Inc. (NASDAQ: AMBA) surged on Wednesday despite no news. The stock has been volatile over the past year, rising sharply and tumbling multiple times. Wednesday's move may just be a continuation of that volatility. Ambarella stock was up about 10.7% at 3:40 p.m. EDT.

So what

The last meaningful development for Ambarella was its fourth-quarter report on March 1. The company beat analyst estimates for both revenue and earnings, although both numbers slumped. Sales of $70.6 million were down 19.3% year over year, while adjusted earnings per share tumbled 51%.

Ambarella chips.

Image source: Ambarella.

On top of the revenue and earnings decline, Ambarella provided guidance that was below expectations. The company expects first-quarter revenue between $54.5 million and $57.5 million, below the consensus analyst estimate of $58.27 million.

The stock surged in the days following this report, peaking in mid-March. It then began to decline, wiping out all its post-earnings gains. Wednesday's rally undoes some of that decline, but the stock is still below where it was a month earlier.

AMBA data by YCharts

Now what

One reason for this volatility could be the valuation. Ambarella is valued at about $1.78 billion, six times sales and nearly 100 times GAAP earnings. That lofty valuation is despite revenue and earnings slumping in fiscal 2018.

Stocks can make big moves up and down for all sorts of reasons, and sometimes for no reason at all. Ambarella's surge today falls into the latter category.

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 10 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.

Click here to learn about these picks!

*Stock Advisor returns as of April 2, 2018

Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ambarella. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AMBA

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More