Cautious Ambarella Management Warns Against Risks In The Near Term

Ambarella Inc AMBA gave a cautious near-term outlook on the drone and wearables market, leading Oppenheimer to retain its Perform rating on the stock, despite strong quarterly results.

That said, the company reiterated confidence in the camera drone, market as it believes this segment's weaker-than-expected results came from short-term yield issues rather than lack of consumer appetite.

Oppenheimer's Take

But, analyst Andrew Uerkwitz believes too much near-term uncertainty amounts to higher near-term risk after the third-quarter results.

Uerkwitz laid down the following three questions for which answers are likely to come only after the next two quarters:

1. “Will professional IP camera in China recover in FY18?”
2. “Will sell-through disappoint for wearables?”
3. “Will major drone customers demand lower prices?”

Long-Term Commentary

Over the long term, the analyst is increasingly concerned about DJI's overwhelming dominance and potential pricing pressure on Ambarella's high-end products.

“We are taking a more prudent outlook into AMBA's FY18 (ending Jan '18), as uncertainties in multiple end markets will cloud visibility before its computer vision chip brings new growth opportunities,” Uerkwitz added.

At last check, shares of Ambarella had plunged 10.17 percent on the day to $55.15.