Ambarella Spikes 9% On 3Q Beat, Upbeat Sales Outlook

Shares of Ambarella jumped 8.6% in Monday’s extended trading session, thanks to the chip maker’s better-than-expected 3Q results and upbeat revenue outlook for 4Q.

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Ambarella’s (AMBA) 3Q revenues fell 17.4% year-over-year to $56.1 million but surpassed analysts’ expectations of $55 million. Meanwhile, its adjusted EPS of $0.09 also came ahead of the Street’s estimates of $0.05. EPS declined by 71.9% year-over-year.

“Our AI vision portfolio is well positioned for the megatrends around security, safety and automation, and the pandemic appears to be accelerating the digital transformation,” said Fermi Wang, Ambarella CEO. “We are announcing a significant automotive revenue funnel and providing a strong CV (computer vision) growth outlook. We have also recently added new CV customers in Asia, expanded our organization and strengthened our position in high volume markets with the introduction of CV28.” (See AMBA stock analysis on TipRanks).

For 4Q, Ambarella projects revenues of between $56 million and $60 million, compared to the Wall Street average forecast of $51.2 million.

On Nov. 16, Rosenblatt Securities analyst Kevin Cassidy reiterated a Buy rating on the stock and the price target of $65 (2.1% downside potential). In a note to investors, Cassidy wrote, “We see 3QF21 as marking the trough in y/y revenue decline. This is not only due to the rebound in automotive and surveillance demand but enhanced by Ambarella’s pipeline of new, higher priced SoCs (System On Chip) ramping into production adding leverage to the income model in FY22. For this we are elevating AMBA to our top pick going into CY21.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 5 Buys and 2 Holds. The average price target stands at $65 and implies downside potential of about 2.1% to current levels. Shares were up by about 9.6% year-to-date.