Ambarella stock drops 7% on weak forecast, analysts downgrade to Neutral

By Senad Karaahmetovic

Ambarella (NASDAQ:) shares are down almost 7% in pre-market after the company offered the first-quarter forecast that trailed analyst estimates.

Ambarella reported of $0.23 on revenue of $83.3 million, beating the consensus for earnings of $0.14 on revenue of $83M. Revenue declined nearly 8% year-to-year while the adjusted gross margin declined by 130 basis points YoY to 63.5%.

“We achieved significant milestones in fiscal 2023 towards our transformation to an edge AI company,” said Fermi Wang, president and CEO.

The company sees this quarter’s revenue at $62M (up or down $2M), a much stronger-than-expected decline QoQ. The adjusted gross margin is seen in the range of 62-64%.

“Our customers indicate end market demand is healthy, but we are experiencing a more pronounced slowdown as they reduce inventory. Our Q1 revenue is expected to be well below end market consumption, and we currently do not expect these existing cyclical factors to cause future quarter revenue to decline below our Q1 guidance,” Wang added.

Roth MKM Partners analysts downgraded AMBA stock to Neutral.

“We believe AMBA represents a differentiated investment opportunity in computer vision and low power video/radar processors. AMBA reported steady quarter results but guided below consensus reflecting customer inventory adjustments and backlog order pushouts, particularly in the company’s IoT/ consumer segment. We believe end demand, particularly in automotive, remains healthy and expect a relatively short-lived inventory adjustment for AMBA in its target markets,” they said in a note.

Susquehanna analysts said the Q1 guidance was “significantly worse” than the Q4 results.

“We believe Ambarella is a key player in automotive and industrial AI, harnessing a robust lineup of image and video processing applications. Their strong investment into one of the most important technologies of the decade also increases Ambarella’s chances of being acquired by an OEM, Tier-1 or semi looking to “catch up” in autonomous vehicles/robotics. We reiterate our Positive rating,” analysts said and raised the price target to $100 per share.