October 18, 2021

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Ambarella (AMBA) Down 14.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Ambarella (AMBA). Shares have lost about 14.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ambarella due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Ambarella Reports Q4 Results

Ambarella reported better-than-expected fourth-quarter fiscal 2020 results. The company’s quarterly earnings of 14 cents per share beat the Zacks Consensus Estimate by 16.7%.

Notably, quarterly earnings remained flat, year over year, as benefits from stellar revenues were offset by elevated costs and expenses, as well as higher number of shares outstanding.

The company’s quarterly revenues of $57.2 million came in line with the consensus mark. The top line increased 12% year over year. Its transition to a video AI company is a tailwind. Softness in the automotive and security camera market slightly hurt Ambarella’s overall revenue growth in the quarter.

Ambarella’s CV portfolio is also attracting customers, helping it expand the client base. During the quarter, the company shipped pre-production parts and development systems to more than 100 customers.

Operating Metrics

On a non-GAAP basis, the company reported gross margin of 58.7%, which was 60-basis points above the year-ago quarter’s figure, primarily owing to favorable mix. The fiscal fourth-quarter non-GAAP gross margin also came in higher than management’s guided range of 56.5-58.5%.

Sequentially, non-GAAP operating expenses came in at $30.5 million compared with the previous quarter’s $29.3 million.

Balance Sheet & Cash Flow

Ambarella ended fiscal 2020 with cash and cash equivalents & marketable securities of $231.4 million, up from the $194 million recorded at the end of fiscal 2019.

The company generated operating cash flow of $4.1 million during the fiscal fourth quarter and $39.4 million for fiscal 2020.

Outlook

For first-quarter fiscal 2021, revenues are expected between $52 million and $57 million. Non-GAAP gross margin is anticipated within 57.5-59.5%. Non-GAAP operating expenses are projected at $33-$35 million.

The company is concerned about the coronavirus impact on its China and non-China supply chains. So far in the ongoing quarter, Ambarella has witnessed some order push as well as cancellations due to coronavirus-led business disruptions.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -6.02% due to these changes.

VGM Scores

At this time, Ambarella has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ambarella has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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