Why Smith & Wesson, Dynavax Technologies, and Ambarella Slumped Today

Image source: Smith & Wesson.

The stock market generally did well on Friday, defying what seemed like bad news in the form of a sluggish employment report for August. Despite creating fewer jobs than most economists had expected, the U.S. economy still appears to be relatively strong, and the potential for the Federal Reserve to hold off on a rate hike for at least a few months longer seemed to improve in light of the lackluster job gains. Major market benchmarks were generally up between a third of a percent and a half percent, but some stocks still fell on the day. Among the worst performers were Smith & Wesson (NASDAQ: SWHC), Dynavax Technologies (NASDAQ: DVAX), and Ambarella (NASDAQ: AMBA).

Smith & Wesson misfires

Smith & Wesson dropped 6% despite reporting impressive growth in its most recent quarterly report. The gun-maker reported fiscal first-quarter financial results late Thursday, which features sales gainsof more than two-fifths that resulted in adjusted net income nearly doubling. The company also raised its guidance for the full 2017 fiscal year, now expecting sales of between $900 million and $920 million that could produce adjusted earnings of $2.38 to $2.48 per share. Yet some analysts believe that conditions can only worsen for Smith & Wesson and the gun industry, especially if advocates for greater gun control win important elected positions in the 2016 elections. Moreover, a drop in volume of FBI criminal background checks further supported the theory that gun sales might have peaked, and that would be bad news for Smith & Wesson despite an impressive history of past growth.

Dynavax misses its meeting

Dynavax Technologies plunged Friday, losing almost a third of its value. The U.S. Food and Drug Administration said that it would cancel a panel that it had expected to convene in November to help evaluate the drug company's proposed Heplisav-B vaccine to fight the hepatitis B virus. Investors took that as a negative sign, especially because the FDA often relies on the opinions of outside experts who serve on advisory panels to make final decisions on whether to approve a drug. The stock's response reflects nervousness among investors that any future approval might be delayed as a result of the FDA move, although the regulatory body said that it could schedule another meeting in the future when it becomes necessary.

Ambarella looks for a hero

Finally, Ambarella declined 7%. The maker of video chips reported fiscal second-quarter results that included significant pullbacks, including a 23% drop in revenue and a decline in adjusted net income of almost 40%. Moreover, the company doesn't see its situation turning around dramatically in the near future, as it expects annual revenue for fiscal 2017 to be flat to down 5% compared to its previous fiscal year. Those results were actually somewhat better than many investors had feared, but Ambarella is also counting on major customer GoPro (NASDAQ: GPRO) to have success with some of its new product launches. With such a close relationship, Ambarella's fortunes are closely tied to GoPro's, and so the holiday season will say a lot about what's likely to happen with Ambarella going forward.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ambarella and GoPro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.