Ambarella stock pulled back on Wednesday after the company issued weak guidance with its earnings beat. The company also disclosed that GoPro, which has been a big customer, has probably dropped it as a supplier for future products. That loss triggered a flurry of changes to analyst models, including at least one upgrade and more than one cut to price targets.

The general consensus toward GoPro in this case seems to be: “Don’t let the door hit you on the way out.” However, there’s no 100% guarantee that the company’s business is gone, as Ambarella management simply said they’re very confident that their chips aren’t in the Hero 6 camera due to a lack of design activity.

Ambarella

Loss of GoPro is a good thing

In a research note dated March 1, Dougherty & Company analyst Charles Anderson said he upgraded Ambarella stock to Buy from Neutral and set a $75 price target. He noted that most investors probably see the company’s loss of GoPro’s business as a positive rather than a negative, which is why he upgraded Ambarella stock for expected multiple expansion. He feels that it means the non-GoPro business is growing more quickly that he had believed it was, which means earnings will be higher in the long term.

The company posted $87.5 million in revenue and earnings of 92 cents per share for the fourth quarter, compared to the consensus numbers of $86 million and 75 cents per share. The gross margin beat Anderson’s estimate by 130 basis points, while the company’s operating expenditures were $1 million lower than estimates.

The analyst added that the IP Security and Auto segments seem to be growing more quickly than he had expected. Management reported strength in Drones, Automotive, Home Monitoring and even sports cameras, with GoPro as the leading customer in the fourth quarter. The non-GoPro segments grew 7% year over year.

Ambarella guides week

Unfortunately, Ambarella management is looking for only $62.5 million to $64.5 million in revenue for the first quarter of fiscal 2018 (at the mid-point of the provided range), while the Street was looking for $70.5 million. Implied earnings would be 35 cents per share at the mid-point, added Anderson. He said non-GoPro revenue for fiscal 2018 is implied at around $296 million, while he had been expecting $286 million before last night’s report.

Stifel analyst Kevin Cassidy slashed his price target for Ambarella stock in his research note dated Feb. 28. He’s been calling for the company to dump GoPro as a customer for years, and he feels that it is now able to allocate its resources to markets with higher growth rates. This is why management guided for flat revenue for fiscal 2018, or a 25% increase excluding the GoPro revenue. It’s also why they expect earnings to fall, but Cassidy sees this guide as “kitchen sink” and “significantly de-risking the shares.”

His price target cut is based on 25 times his new fiscal 2019 non-GAAP earnings estimate.

Dumping GoPro de-risks Ambarella

Morgan Stanley analyst Joseph Moore also views Ambarella’s parting of ways with GoPro as a positive, calling the action camera maker “a long term [sic] headwind.” He agrees with Anderson in that this will be good for the company’s multiple but bad for its earnings. However, like Cassidy, he cut his price target on the stock, trimming it from $70 to $65 per share. He maintained his Overweight rating on the name, however.

Deutsche Bank analyst Ross Seymore has a Hold rating on Ambarella stock and also slashed his price target on it, moving from $65 to $55 per share. He agrees with the widely-held view that the shares are de-risked now, but he says it’s because of the weak guide. He’s still waiting for signs of stability and expects Ambarella stock to remain range-bound until signs emerge.

Shares of Ambarella slumped by more than 5.14% to $55.35 during regular trading hours on Wednesday.