Insiders At Ambarella Sold US$4.2m In Stock, Alluding To Potential Weakness

Ambarella, Inc. (NASDAQ:AMBA) shareholders may have reason to be concerned, as several insiders sold their shares over the past year. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

View our latest analysis for Ambarella

The Last 12 Months Of Insider Transactions At Ambarella

In the last twelve months, the biggest single sale by an insider was when the Senior VP of Systems & GM of Asia Design Centers, Chi-Hong Ju, sold US$387k worth of shares at a price of US$75.72 per share. That means that an insider was selling shares at below the current price (US$76.43). As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. We note that the biggest single sale was only 3.0% of Chi-Hong Ju's holding.

Ambarella insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Ambarella Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Ambarella shares. Specifically, insiders ditched US$1.5m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Does Ambarella Boast High Insider Ownership?

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Ambarella insiders own about US$182m worth of shares (which is 5.8% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.

What Might The Insider Transactions At Ambarella Tell Us?

Insiders sold Ambarella shares recently, but they didn't buy any. Looking to the last twelve months, our data doesn't show any insider buying. It is good to see high insider ownership, but the insider selling leaves us cautious. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. At Simply Wall St, we found 2 warning signs for Ambarella that deserve your attention before buying any shares.

But note: Ambarella may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.