Ambarella Posts Strong Q2 Results; Shares Rise 6.3%

Shares of semiconductor design company Ambarella (AMBA) rallied 6.5% in Tuesday’s extended trade after it reported better-than-expected results for the second quarter of Fiscal Year 2022 driven by robust top-line growth.

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Revenues climbed 58% year-over-year to $79.3 million and surpassed analysts’ expectations of $75.7 million. The upside can be attributed to the introduction of new product cycles to existing markets and the expansion into new markets.

Meanwhile, adjusted EPS of $0.35 also came ahead of the Street’s estimates of $0.25. The figure compares favorably with the earnings of $0.06 per share reported in the same quarter last year. (See Ambarella stock charts on TipRanks)

Research and development expenses increased 20.6% to $39.6 million from the year-ago quarter. Selling, general and administrative costs rose 17.7% to $15.8 million.

The President and CEO of Ambarella, Fermi Wang, said, “We believe we experienced the worst of the wafer supply shortfall from the Texas freeze in Q2, and we are seeing a 2H recovery from this event. While the significant industry wide supply-chain challenges persist, we expect F2022 to represent a major inflection in our business, and we are excited about our future.”

For the third quarter, Ambarella expects to generate revenues in the range of $88 million to $92 million. Gross margin on an adjusted basis is expected to be between 61% and 63%.

Following the release, Rosenblatt Securities analyst Kevin Cassidy assigned a Buy rating to the stock and raised the price target to $160 from $145. The new price target implies 54.5% upside potential from current levels.

Cassidy said, “With 240 customers in various stages of CV-based product development and nearly 60 unique customers achieving product status in 1HC21, the company has made the transition to higher valued Artificial Intelligence enabled Internet of Things (AIoT) or CVflow products. The CVflow products are driving revenue growth, expanding operating margins and increasing earnings.”

The stock has a Moderate Buy consensus rating based on 5 Buys, 2 Holds and 1 Sell. The average Ambarella price target of $132.86 implies 28.3% upside potential from current levels. Shares have gained 79.4% over the past year.

According to TipRanks’ Smart Score rating system, Ambarella gets a 6 out of 10, which indicates that the stock is likely to perform in line with market averages.