U.S. Blacklist News Destroys AMBA Stock

While AMBA landed on the SSR list today, options players are still piling on

by Lillian Currens

Published on Oct 8, 2019 at 11:54 AM
Updated on Jun 24, 2020 at 10:16 AM

GoPro supplier Ambarella Inc (NASDAQ:AMBA) is sinking today, as the Trump administration continues to blacklist even more Chinese companies, including some of the country's top AI startups. The semiconductor sector has been hit especially hard by the news, dragging down AMBA, which has lost 11.2% to trade at $50.81 -- on pace for its lowest close in over a month 

While the chip maker is still trading higher than its pre-bull gap levels, it just breached its 40-day moving average for the first time since said bull gap back in late-August. In fact AMBA has now shed almost 25% off its Sept. 11 year-to-date peak of $67.15. Now, the shares are testing support at the 80-day moving average. 

AMBA Oct 8

Stifel was quick to chime in, cutting its price target to $54 from $61. This puts the consensus 12-month price target at $57.44, which sits at a 12.8% premium to current levels. It looks like the brokerage bunch has already been cautious around the security, with the majority in coverage giving AMBA a "hold" or worse rating. 

Short sellers are likely cheering today, despite AMBA landing on the short-sale restricted (SSR) list. The 4.24 million shares sold short make up a solid 13.5% of the stock's available float, and would take over six days to cover at the equity's average pace of trading. 

This hasn't stopped options traders from piling on, though. So far, 5,210 puts and 7,361 calls have exchanged hands, 17 times what is typically seen at this point. Most of this action is taking place at the weekly 11/15 series, where positions are being opened at the 57.50- and 62.50 strike calls. This suggests that traders could be expecting the shares of AMBA to rebound from today's dip. On the other hand, the weekly 11/15 50-strike put is also seeing some attention today, with positions being opened here as well. 


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