Ambarella stock drops 20% on guidance miss; TD Cowen downgrades after ‘another painful reset’

Ambarella (NASDAQ:) shares fell more than 20% in premarket Wednesday after the chipmaker its Q2 results.

While Q2 EPS of ($0.15) and revenue of $62.1 million (down 23% year-over-year) came in better than the consensus estimates of ($0.21) and $62.02M, respectively, Q3 guidance missed expectations.

For Q3/24, the company expects revenue of $50M plus or minus 4%, compared to the consensus estimate of $67.6M.

TD Cowen analysts downgraded the stock after “another painful reset.” Their new rating is Market Perform with a price target lowered by $25 to $65 per share.

“Another hard expectation cut as customer inventory burn accelerates, leaving the company with little visibility in the near (and intermediate) term. With core video processing impairing the P&L and strategic revenue from L2+ ADAS and LLM still >2 years out (at least), we step aside and move to Market Perform,” they wrote in a downgrade report.

Roth MKM analysts added that “AMBA’s near-term outlook remains challenging as customers aggressively work down inventory, particularly in China where end demand remains relatively soft.” They cut the price target to $60 per share.

(Additional reporting by Senad Karaahmetovic)