A month has gone by since the last earnings report for Ambarella (AMBA - Free Report) . Shares have lost about 2.7% 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’s Q2 Earnings & Revenues Beat, Fall Y/Y
Ambarella reported second-quarter fiscal 2019 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
However, on a year-over-year basis, its top- and bottom-line results registered a decline. The top line, however, was within its previously projected range. The company had expected GoPro revenues to be insignificant in the fiscal second quarter.An expected decline in revenues from non-GoPro sports cameras and wearables, particularly in the second half of the fiscal, has been a concern. The company had also predicted that the considerable decline in revenues from the drone market will adversely impact the quarter’s top-line performance.
However, management notes that the company’s strategy to focus on computer vision applications in the IP security, automotive and robotics AI markets is a positive.
On per-share basis, the company’s non-GAAP earnings came in at 25 cents, witnessing a substantial decline from the year-ago quarter’s level of 48 cents. The fall resulted from lower revenues and elevated operating expenses. However, the figure topped the Zacks Consensus Estimate of 13 cents by a considerable margin.
Notably, the stock has underperformed the industry on a year-to-date basis, losing 32.4% against the industry’s decline of 1.5%.
Quarter in Detail
The company’s fiscal second-quarter revenues slipped 12.8% year over year to $62.47 million. However, quarterly revenues topped the Zacks Consensus Estimate of $62.27 million. The company’s revenues came a little higher than the mid-point of management’s guided range of $60-$64 million.
On a non-GAAP basis, the company reported gross margin of 61.4%, which came in 160 basis points lower than the year-ago quarter.
Non-GAAP net income plunged to $8.5 million from $19.3 million reported in the year-ago quarter.
Ambarella ended the fiscal second quarter with cash and cash equivalents & marketable securities of $376 million, down from $414.1 million recorded in the previous quarter.
During the reported quarter, the company bought back 1,119,193 shares, for a total cash consideration of $45 million approximately. Since the inception of its share-repurchase program on Jun 5, 2018, the company has bought back a total of 862,805 shares for a total consideration of $33.9 million approximately.
For third-quarter fiscal 2019, revenues are expected between $55.5 million and $58.5 million (mid-point $57 million).
Non-GAAP gross margin is expected between 59% and 60.5%.
Non-GAAP operating expenses are estimated in the range of $30.5-$32 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -5166.67% due to these changes.
Currently, Ambarella has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Ambarella has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.