In a report released yesterday, Vivek Arya from Bank of America Securities reiterated a Hold rating on Ambarella (AMBA – Research Report), with a price target of $80.00.
Vivek Arya has given his Hold rating due to a combination of factors that reflect both opportunities and challenges for Ambarella. The company has shown strong sales performance, with its CV5 and CV7 products contributing significantly to growth. This momentum is expected to continue, potentially driving mid-to-high teens year-over-year growth in the upcoming fiscal years. However, there are concerns about the impact of tariff uncertainties on customer demand, particularly in the latter half of the year, which could hinder consistent growth.
Despite Ambarella’s innovative product roadmap and high exposure to AI, Arya notes that the company’s earnings potential remains limited. The high operating expenses, which account for a significant portion of sales, are expected to offset the sales growth, keeping earnings per share relatively muted. Furthermore, even with an optimistic sales growth assumption, the projected earnings per share by FY28 suggest a high price-to-earnings ratio compared to peers, which justifies maintaining a Hold rating. Arya also highlights the strategic challenges, such as losing a bid due to scale, which the company is addressing through partnerships.
According to TipRanks, Arya is a 5-star analyst with an average return of 15.1% and a 55.15% success rate. Arya covers the Technology sector, focusing on stocks such as Nvidia, Intel, and Marvell.