Ambarella's Hyper-Seasonality Continues To Be A Concern

Previewing Ambarella Inc AMBA's fourth-quarter results, Deutsche Bank said in a note released on Thursday the hyper-seasonality of the company's demand patterns continues to leave it on the sidelines. That said, the firm is impressed with the company's continued advances in technology and end-market applications.

Q4 Headline Numbers To Align With Street

Analysts Ross Seymore and Sidney Ho expects a likely in-line print for the fourth quarter as GoPro Inc GPRO appears back on track. The analysts expect Ambarella's fourth-quarter revenues to be at $87 million, above the $86 million Street view, with the upside attributed to better than expected growth in sports/wearables. The segment is expected to report a 20 percent sequential drop. Earnings per share are likely to match the Street estimate of $0.75, the analysts added.

Related Link: Ambarella Slowly Emerging From GoPro's Shadow

Expected Q4 Performance By Other Segments

• IP Security: Down 8 percent sequentially.
• Drones: Down 15 percent sequentially on seasonal build patterns.
• Auto: 10 percent sequential drop.

Above-Consensus Q1 Guidance Likely

Deutsche Bank expects Ambarella to guide first-quarter revenues to $76 million, above the $71 million consensus estimate, and earnings per share to $0.58 versus the $0.48 Street estimate. Segment-wise break-up of expectations concerning the first quarter guidance are as follows:

• IP Security: Down 8 percent sequentially.
• Auto: Down 5 percent sequentially.
• Drones: Flat.
• Sports & Wearables: Down 25 percent sequentially, incorporating a conservative potential first half inventory burn estimate.

The company is scheduled to release its results after the market close Feb. 28.

Deutsche Bank maintains its Hold rating and $65 price target for the shares of the company.

At the time of writing, Ambarella was surging up 3.17 percent to $58.84.