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Why Is Ambarella (AMBA) Up 7.3% Since Its Last Earnings Report?
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A month has gone by since the last earnings report for Ambarella, Inc. (AMBA - Free Report) . Shares have added about 7.3% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is AMBA due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ambarella Q4 Earnings & Revenues Beat, Down Y/Y
Continuing its earnings streak alive for the 11th time in a row, Ambarella reported better-than-expected results for fourth-quarter fiscal 2018. In fact, the company beat its projections at every point — revenues and margins.
However, on a year-over-year basis, its top- and bottom-line results registered declines mainly due to a substantial plunge in chip sales to GoPro, along with the prevalent softness in the drone market. Earnings were also adversely affected by elevated operating expenses.
Let’s discuss the quarterly results in detail.
Quarter in Detail
The company’s fiscal fourth-quarter revenues slipped 19.4% year over year to $70.6 million, mainly due to the decline in drone and GoPro sports-camera revenues, partially offset by strong performances in the IP security, auto and non-GoPro wearable markets.
However, quarterly revenues surpassed the Zacks Consensus Estimate of $70 million and came above management’s guided range of $68-$72 million. Moreover, excluding sales to GoPro, revenues remained flat year over year at $57.3 million. Sales to GoPro significantly declined year over year from $30.2 million to $13.3 million. During the fiscal fourth quarter, GoPro’s contribution to total revenues was down to 18.8% from 32.4% in the year-ago quarter.
Apart from GoPro, WT Microelectronics and Chicony were the two companies which have contributed more than 10% to Ambarella’s fiscal fourth-quarter total revenues. WT Microelectronics’ contribution totaled 49.6%, while Chicony contributed 10.3%.
On a non-GAAP basis, the company reported gross margin of 64.7%, which came in 250 basis points (bps) lower than the year-ago quarter. However, the figure expanded 70 bps from the previous-quarter tally, mainly driven by better IP security product mix, and partially offset by softness in drone and sports-camera revenues. Also, the fiscal fourth-quarter non-GAAP gross margin was higher than management’s earlier guidance of 62-63.5%.
Non-GAAP operating expenses came in at $29.5 million, up from $25.4 million incurred in the year-ago quarter and $27.2 million reported in third-quarter fiscal 2018. Operating expenses flared up primarily due to escalating chip-development costs, primarily toward the development of 10-nanometer CV chips. However, non-GAAP operating expenses remained within the company’s previously guided range of $28.5-$30 million.
Non-GAAP operating income dipped to $16.2 million from $33.4 million reported in the year-ago quarter. Operating margin contracted to 22.9% from 38.2% reported in the year-ago quarter chiefly due to reduced gross margin and soaring operating expenses.
Non-GAAP net income plunged to $15.8 million from $32 million reported in the year-earlier quarter. On per-share basis, the company’s earnings came in at 45 cents, witnessing a substantial decline from the year-ago quarter’s level of 92 cents. This year-over-year fall stemmed from lower revenues and elevated operating expenses. However, the figure came well ahead of the Zacks Consensus Estimate of 37 cents.
Balance Sheet
Ambarella ended the fiscal fourth quarter with cash and cash equivalents & marketable securities of $434.6 million, up from $414 million recorded in the previous quarter.
During the reported quarter, the company bought back 66,747 shares, for a total cash consideration of $3.3 million. Additionally, in February 2018, the company bought 142,344 shares at an average price of $48.05. Since the inception of its share-repurchase programs in June 2016, the company has bought back a total of 1,642,228 shares for a total consideration of $81.8 million. Ambarella has approximately $24.9 million remaining under the $50-million repurchase program, which commenced on Jul 1, 2017.
Guidance
For first-quarter fiscal 2019, revenues are expected to be between $54.5 million and $57.5 million (mid-point $56 million), down 10.3-15% from the year-earlier quarter. The guidance at the mid-point is slightly lower than the Zacks Consensus Estimate of $59.2 million.
Non-GoPro revenues in the fiscal first quarter are likely to drop 12% year over year.
The company predicts that the considerable decline in revenues from the drone market will adversely impact the current quarter’s top-line performance. Additionally, it believes shortage of memory chips will thwart the company’s revenues in the fiscal first quarter. However, Ambarella anticipates strong year-over-year revenue growth in IP security (both professional and consumer) and automotive market.
Non-GAAP gross margin is expected to lie between 60% and 62%, as compared with 64.3% recorded in the year-ago quarter. The contraction will be due to increase in China security revenues and decline in drone revenues.
Non-GAAP operating expenses are estimated between $30 million and $32 million, up sequentially due to increase in “chip tape out fees and engineering head count.”
The company did not provide any outlook for fiscal 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted by 550% due to these changes.
At this time, AMBA has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. However, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise AMBA has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Ambarella (AMBA) Up 7.3% Since Its Last Earnings Report?
A month has gone by since the last earnings report for Ambarella, Inc. (AMBA - Free Report) . Shares have added about 7.3% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is AMBA due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ambarella Q4 Earnings & Revenues Beat, Down Y/Y
Continuing its earnings streak alive for the 11th time in a row, Ambarella reported better-than-expected results for fourth-quarter fiscal 2018. In fact, the company beat its projections at every point — revenues and margins.
However, on a year-over-year basis, its top- and bottom-line results registered declines mainly due to a substantial plunge in chip sales to GoPro, along with the prevalent softness in the drone market. Earnings were also adversely affected by elevated operating expenses.
Let’s discuss the quarterly results in detail.
Quarter in Detail
The company’s fiscal fourth-quarter revenues slipped 19.4% year over year to $70.6 million, mainly due to the decline in drone and GoPro sports-camera revenues, partially offset by strong performances in the IP security, auto and non-GoPro wearable markets.
However, quarterly revenues surpassed the Zacks Consensus Estimate of $70 million and came above management’s guided range of $68-$72 million. Moreover, excluding sales to GoPro, revenues remained flat year over year at $57.3 million. Sales to GoPro significantly declined year over year from $30.2 million to $13.3 million. During the fiscal fourth quarter, GoPro’s contribution to total revenues was down to 18.8% from 32.4% in the year-ago quarter.
Apart from GoPro, WT Microelectronics and Chicony were the two companies which have contributed more than 10% to Ambarella’s fiscal fourth-quarter total revenues. WT Microelectronics’ contribution totaled 49.6%, while Chicony contributed 10.3%.
On a non-GAAP basis, the company reported gross margin of 64.7%, which came in 250 basis points (bps) lower than the year-ago quarter. However, the figure expanded 70 bps from the previous-quarter tally, mainly driven by better IP security product mix, and partially offset by softness in drone and sports-camera revenues. Also, the fiscal fourth-quarter non-GAAP gross margin was higher than management’s earlier guidance of 62-63.5%.
Non-GAAP operating expenses came in at $29.5 million, up from $25.4 million incurred in the year-ago quarter and $27.2 million reported in third-quarter fiscal 2018. Operating expenses flared up primarily due to escalating chip-development costs, primarily toward the development of 10-nanometer CV chips. However, non-GAAP operating expenses remained within the company’s previously guided range of $28.5-$30 million.
Non-GAAP operating income dipped to $16.2 million from $33.4 million reported in the year-ago quarter. Operating margin contracted to 22.9% from 38.2% reported in the year-ago quarter chiefly due to reduced gross margin and soaring operating expenses.
Non-GAAP net income plunged to $15.8 million from $32 million reported in the year-earlier quarter. On per-share basis, the company’s earnings came in at 45 cents, witnessing a substantial decline from the year-ago quarter’s level of 92 cents. This year-over-year fall stemmed from lower revenues and elevated operating expenses. However, the figure came well ahead of the Zacks Consensus Estimate of 37 cents.
Balance Sheet
Ambarella ended the fiscal fourth quarter with cash and cash equivalents & marketable securities of $434.6 million, up from $414 million recorded in the previous quarter.
During the reported quarter, the company bought back 66,747 shares, for a total cash consideration of $3.3 million. Additionally, in February 2018, the company bought 142,344 shares at an average price of $48.05. Since the inception of its share-repurchase programs in June 2016, the company has bought back a total of 1,642,228 shares for a total consideration of $81.8 million. Ambarella has approximately $24.9 million remaining under the $50-million repurchase program, which commenced on Jul 1, 2017.
Guidance
For first-quarter fiscal 2019, revenues are expected to be between $54.5 million and $57.5 million (mid-point $56 million), down 10.3-15% from the year-earlier quarter. The guidance at the mid-point is slightly lower than the Zacks Consensus Estimate of $59.2 million.
Non-GoPro revenues in the fiscal first quarter are likely to drop 12% year over year.
The company predicts that the considerable decline in revenues from the drone market will adversely impact the current quarter’s top-line performance. Additionally, it believes shortage of memory chips will thwart the company’s revenues in the fiscal first quarter. However, Ambarella anticipates strong year-over-year revenue growth in IP security (both professional and consumer) and automotive market.
Non-GAAP gross margin is expected to lie between 60% and 62%, as compared with 64.3% recorded in the year-ago quarter. The contraction will be due to increase in China security revenues and decline in drone revenues.
Non-GAAP operating expenses are estimated between $30 million and $32 million, up sequentially due to increase in “chip tape out fees and engineering head count.”
The company did not provide any outlook for fiscal 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted by 550% due to these changes.
Ambarella, Inc. Price and Consensus
Ambarella, Inc. Price and Consensus | Ambarella, Inc. Quote
VGM Scores
At this time, AMBA has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. However, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise AMBA has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.