Analysts Lower Ambarella Price Targets: Shifting Focus From Earnings To Underlying Tech Amid Market Weakness

Ambarella Inc AMBA reported a second-quarter FY23 revenue decline of 23% year-on-year to $62.12 million, beating the consensus of $62.05 million. EPS of $(0.15) beat the estimate of $(0.21).

The company sees third-quarter revenue of $50 million, plus or minus 4%, versus estimates of $67.6 million. Adjusted gross margin is expected to be between 62% and 64%.

Analysts updated coverage on the company.

Morgan Stanley (Joseph Moore): Overweight, Lowers Price Target From $89 To $81

"The severity of revenue weakness is quite surprising to us, in the context that the company's biggest market (professional surveillance) is seeing a transition to computer vision (CV) technology that has more than 2x higher price points, and the automotive segment is still seeing the benefit of a number of design wins."

"Given the lack of earnings visibility near term, and the lack of certainty around longer term opportunities, we think that investor focus will shift towards the value of the underlying technology rather than conviction about earnings power."

Rosenblatt (Kevin Cassidy): Buy, Lowers Price Target From $95 To $85

"While we expected an October guidance below consensus, Ambarella's end markets, particularly consumer surveillance video, end demand has weakened much more than we had expected. The second half of a year seasonal uptick will not happen this year. This has resetting estimates well below our previous estimates."

"End demand for professional surveillance camera is healthy, though inventory lingers. Management is turning to China automotive tier 1s with the lower cost CV72."

Needham (N. Quinn Bolton): Buy, Lowers Price Target From $100 To $90

"IoT is very weak. Management is experiencing more aggressive inventory corrections and end-market weakness now, but expects the channel to clear by FYE24."

"While the non-core IoT business continues to experience broad weakness, the automotive pipeline is likely building and the company is making progress with AI Inferencing."

Price Action: AMBA shares are trading lower by 18.14% at $62.03 on the last check Wednesday.