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Ambarella gains on earnings beat, revenue growth not expected until fiscal 2025

Published 2023-12-01, 09:44 a/m
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AMBA
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Ambarella (NASDAQ:AMBA) shares are trading higher in early Friday trading after the company's latest quarterly earnings beat consensus expectations.

The company reported a third-quarter loss of $0.28 per share, $0.11 better than the analyst estimate of a $0.39 loss per share. Revenue for the quarter came in at $50.6 million versus the consensus estimate of $50.01 million. Despite the beat, revenue declined by 39% compared to the same period last year.

However, AMBA noted that customers "appear to be making progress with their inventory reduction efforts," and they expect to return to revenue growth in fiscal 2025.

“We remain determined and focused on our strategic R&D priorities for the introduction of a portfolio of SoCs and software targeting more sophisticated AI inference workloads," said CEO Fermi Wang.

Looking ahead, the company sees Q4 revenue between $50 and $53 million, versus the consensus of $50.35 million.

At the time of writing, AMBA shares are up 5%, above the $61 per share mark.

Following the earnings release, BofA analysts reiterated an Underperform rating and $58 per share price target on the stock.

They told investors in a note that the company is nearing the end of the cycle, but visibility and growth concerns remain.

"Reiterate Underperform and maintain PO at $58 on unch. 8x CY24E EV/S following modest Q3 and Q4 beat (1%/2% above estimates) on inventory correction nearly complete yet continued IoT weakness," the analysts said.

"Management states markets appear to be improving, although IoT-related weakness weighs on growth as customers work down last of excess inventory. Autos market also seeing weak spots with some customer order pushouts and project rescheduling on weaker demand (guided flat QoQ in JanQ vs IoT up ~3%)," they added.

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