Darker Days Ahead for Ambarella?
Slowing camera sales have killed GoPro over the last few months, which in turn has led to Ambarella's downfall. Things aren't expected to get better this year as well as GoPro is projected to report a 15 percent drop in sales this year due to slothful demand for action cameras.
As per the Pacific Crest estimates, GoPro orders will still account for about one fourth of Ambarella’s sales this year.
Ambarella was badly hurt the previous year, and to make matters worse, Qualcomm has been belligerently selling new mobile SoCs for connected cameras. Qualcomm is the largest chipmaker in the world. Qualcomm plans to expand its reach from the saturated mobile chip segment, and has been using its mobile technology to manufacture SoCs for drones, action cameras, and dashcams which can be linked to 3G or 4G networks.
Qualcomm’s image processing SoCs were not as cost operative compared to Ambarella’s SoCs. However, Qualcomm could achieve a price lead as soon as cellular connections were powered in. On the other hand, Qualcomm has previously accomplished design wins for 4G-featured action cameras such as the Benq’s QC1 and 4GEE Action Cam.
Recently, the news was confirmed that Qualcomm was putting efforts to snatch GoPro and drone giant DJI away from the company. It is likely that Qualcomm can potentially win GoPro over from Ambarella. At the time of last quarter’s conference call, GoPro detailed that its new product Hero 5 will be the most appropriate and connected camera till its launch, intensely signifying that the company might use a 4G-linked SoC same as that of Qualcomm’s. If GoPro switched from Ambarella to Qualcomm, Ambarella will face huge problems and will continue to move downward.
Given the concerns regarding competition from Qualcomm, and GoPro's falling sales, I think investors shouldn't invest in Ambarella in the hopes of a turnaround. As of now, Ambarella is still in troubled waters and I'd suggest investors to stay clear of the stock.
Published on Mar 18, 2016By Yaggyaseni Mittra