Possible Bearish Signals With Ambarella Insiders Disposing Stock

A number of Ambarella, Inc. (NASDAQ:AMBA) insiders sold their shares in the last year, which may have raised concerns among investors. 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, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

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.

Check out our latest analysis for Ambarella

Ambarella Insider Transactions Over The Last Year

The Senior VP of Systems & GM of Asia Design Centers, Chi-Hong Ju, made the biggest insider sale in the last 12 months. That single transaction was for US$317k worth of shares at a price of US$52.90 each. So it's clear an insider wanted to take some cash off the table, even below the current price of US$57.08. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was just 3.3% of Chi-Hong Ju's stake.

Ambarella insiders didn't buy any shares over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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Ambarella Insiders Are Selling The Stock

Over the last three months, we've seen significant insider selling at Ambarella. In total, insiders dumped US$742k worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership Of Ambarella

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Ambarella insiders own about US$134m worth of shares (which is 6.0% 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. And even if we look at the last year, we didn't see any purchases. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Ambarella. While conducting our analysis, we found that Ambarella has 3 warning signs and it would be unwise to ignore these.

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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.