By Ambarella stock is facing a significant decline after the chip maker released disappointing guidance, attributed to a reduction in customer inventories.
In its second-quarter earnings call on Tuesday, Ambarella (ticker: AMBA) revealed that it expects fiscal third-quarter revenue to reach approximately $50 million, give or take 4%. This projection falls well below the $67.5 million estimated by analysts surveyed by FactSet and marks a decline from the $83.1 million reported in the third quarter of 2022.
According to Chief Executive Fermi Wang, “The near-term environment is very challenging as customers are now more aggressively reducing their inventory, and we are now seeing some pockets of weak end-market demand, which further complicates our customers’ efforts to reduce their inventory.” Wang expressed optimism that customer inventory levels will normalize by year-end, setting the stage for a return to growth in the following fiscal year.
As a result of this news, shares of Ambarella plummeted 22% in premarket trading on Wednesday, reaching $59.48. With this decline, the stock has slipped 7.8% in 2023 thus far.
For the second quarter, Ambarella reported a loss of 15 cents per share on revenue of $62.1 million. This performance was in line with analysts’ expectations, who anticipated a loss of 31 cents per share on revenue of $62 million.
Ambarella Faces Challenges in Pursuit of Autonomy and Large-Language Models
Analysts Weigh In on Ambarella’s Prospects
Ambarella, a technology company with high ambitions in autonomous driving and large-language models, is currently facing profitability challenges, according to analysts. Despite the setbacks, several analysts have expressed their optimism for the company’s future and have maintained their positive ratings on Ambarella’s stock.
Susquehanna Analyst Highlights Ambarella’s Ambitions
Susquehanna analyst Christopher Rolland acknowledges Ambarella’s aspirations but points out the costly nature of its endeavors. In a research note, Rolland lowered his price target for the stock to $80 from $92. Nevertheless, he maintains his positive outlook on Ambarella.
Needham Analyst Unfazed by Challenges
N. Quinn Bolton, an analyst at Needham, remains confident in Ambarella’s overall story. Although he lowered his price target to $90 from $100, Bolton urges investors to leverage any weaknesses in the stock price. In his research note, Bolton states that the company’s potential remains intact.
Stifel Analyst Recognizes Cyclical Downturn
Tore Svanberg, an analyst at Stifel, acknowledges that Ambarella is currently experiencing a cyclical trough. Despite this downturn, Svanberg maintains his Buy rating on the stock while lowering the price target to $78 from $95. In his research note, he highlights the company’s strong position in artificial intelligence and suggests that long-term investors may benefit from AMBA’s potential growth or acquisition.
In conclusion, while Ambarella faces profitability challenges and a cyclical downturn, analysts maintain their positive ratings and express optimism for the company’s future. Investors are encouraged to carefully consider the stock’s potential returns in light of its unique position in the semiconductor industry.
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