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Ambarella (AMBA) Down 11.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Ambarella (AMBA - Free Report) . Shares have lost about 11.7% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Ambarella Q2 Earnings Estimates Match, Revenues Beat

Ambarella reported second-quarter fiscal 2023 non-GAAP earnings of 20 cents per share, which matched the Zacks Consensus Estimate. The reported figure dropped 42.9% from the prior-year quarter’s earnings of 35 cents per share.

Revenues surged 2% year over year to $80.9 million and surpassed the consensus mark of $80.3 million. The robust year-over-year top-line growth was primarily driven by an improvement in the automotive and security camera businesses.

Customer & Market Details

Ambarella had two customers that contributed more than 10% in the reported quarter. WT Microelectronics, a fulfillment partner in Taiwan that serves multiple customers in Asia, accounted for 59% of the company’s revenues. Chicony, a Taiwan-based electronics manufacturer serving multiple IOT customers, represented 13% of the company’s revenues.

The momentum in AMBA’s CV flow system-on-a-chip in professional IP cameras across all geographies continued in the reported quarter.

Operating Details

The non-GAAP gross margin was 64.5%, up 170 basis points year over year in the fiscal second quarter.

A healthy customer and product mix, supported by stable price movements, aided the gross-margin expansion in the quarter reported.

On a non-GAAP basis, operating expenses were $44.2 million, up 11.1% sequentially. Non-GAAP operating expenses were higher than the midpoint of the company’s prior guidance, mainly driven by the engineering materials for new products.

Net inventory was $40.1 million as of Jul 31, 2022, down 0.34% sequentially.

Balance Sheet

As of Jul 31, 2022, Ambarella had cash and cash equivalents & marketable securities of $197.9 million compared with $200.6 million as of Apr 30, 2022.

Guidance

For the third quarter of fiscal 2023, revenues are expected between $81 million and $85 million. The non-GAAP gross margin is anticipated at 63-64%.

Non-GAAP operating expenses are projected in the range of $44-$46 million.

Management noted that supply-chain constraints would continue to remain a concern in the third quarter of fiscal 2023.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -20.72% due to these changes.

VGM Scores

Currently, Ambarella has a nice Growth Score of B, 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 bottom 20% quintile 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.

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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