Ambarella Says Sales Could Hit Five-Year Highs, Stock Jumps

The shares of Ambarella Inc. were 9% higher in after-hours trading Tuesday, after the chipmaker forecast that sales could hit a five-year high this quarter.

Ambarella AMBA,
reported a second quarter loss of $7.2 million, or 20 cents per share, on revenue of $79.3 million, up more than 50% from $50.1 million a year ago. After adjusting for stock-based compensation and income tax effects, the company reported earnings of 35 cents per share.

Those results far exceeded average analyst expectations, who required adjusted earnings of 25 cents per share on $75.7 million in revenue. The bigger blow, however, was in Ambarella’s third-quarter forecast, which elicited revenue of $88 million to $92 million.

The midpoint of that guideline, $90 million, reflects quarterly revenue that Ambarella hasn’t achieved since the same quarter in 2016, exactly five years ago. In that quarter, Ambarella had revenue of $100.5 million, one of only two times in the company’s history to exceed $90 million in a quarter.

Chief Executive Fermi Wang attributed the strong performance to its security camera and car chips, which he said accounted for 90% of total sales in the second quarter.

“While significant supply chain challenges remain in the industry, we expect F2022 to be a significant turnaround in our business, and we are excited about our future,” Wang said, referring to an ongoing semiconductor shortage.

Stifel analysts predicted earlier this week that Ambarella would exceed expectations with its results and forecasts based on the strength of its security and automotive businesses, as its chips find a home in advanced driver assistance systems. The analysts expected “growth in both Ambarella’s security and automotive business segments, with the former reaching Q and the latter benefiting [from] constantly new design-win momentum.”

“We believe Ambarella is well positioned to seize an unfair share of the AI/computer vision opportunity, not only in its core strength in security applications, but also in even larger and faster-growing end markets/applications such as advanced Automotive ADAS / monitoring and high-end ‘AI-IoT’ use cases such as smart traffic, smart retail and smart enterprise,” the analysts wrote, maintaining a buy recommendation and a price target of $140.

Ambarella stock closed down 1.8% on Tuesday at $103.57 and then rose 9% in the extended session after the results were released. The stock is up 12.8% so far this year as the S&P 500 index SPX,
has increased by 20.6%.