A month has gone by since the last earnings report for Ambarella (AMBA Quick QuoteAMBA - Free Report) . Shares have lost about 15.8% 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 Loss Narrower Than Expected, Revenues Miss

Ambarella reported a second-quarter fiscal 2024 non-GAAP loss of 15 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 21 cents. The company reported earnings of 20 cents per share in the year-ago quarter.

Second-quarter revenues plunged 23% year over year to $62.1 million, mainly due to customer inventory reduction actions across its IoT end market. Moreover, the top line missed the consensus mark of $62.4 million.

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 54% of the company’s second-quarter revenues. Chicony, a Taiwan-based electronics manufacturer serving multiple IoT customers, represented 14% of Ambarella’s revenues.

The momentum of AMBA’s CV flow system-on-a-chip in professional IP cameras continued in the reported quarter. The company expects to achieve its targeted goal of generating 60% of the total revenues from the CV portfolio in 2024.

Operating Details

The non-GAAP gross margin was 64.6%, up 10 basis points year over year in the fiscal second quarter.

On a non-GAAP basis, operating expenses were $46 million, down $200,000 sequentially. Non-GAAP operating expenses were also lower than the company’s prior guidance in the band of $48-$50 million, mainly due to its expense management actions and the timing of spending between quarters.

Balance Sheet

As of Jul 31, 2023, Ambarella had cash and cash equivalents & marketable securities of $216.5 million compared with $227.4 million as of Apr 30, 2023.

Q3 2024 Guidance

Considering accelerated customer inventory actions across its IoT end market and softening demand across certain pockets of the end market, the company forecasts third-quarter revenues to decline to $50 million (+/- 4%). AMBA also assumes that fourth-quarter revenues will be in the same range, with the expectation of sequential growth resuming in the first quarter of fiscal 2025.

For the third quarter of fiscal 2024, the non-GAAP gross margin is anticipated at 62-64%. Non-GAAP operating expenses are projected in the range of $46-$49 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -21.25% due to these changes.

VGM Scores

Currently, Ambarella has a subpar Growth Score of D, though it is lagging a bit 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.