It has been about a month since the last earnings report for Ambarella (AMBA Quick QuoteAMBA - Free Report) . Shares have lost about 14.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Ambarella Tops Q1 Earnings and Revenue Estimates

Ambarella reported better-than-expected first-quarter fiscal 2021 results. The company reported non-GAAP earnings of 4 cents per share for the quarter, while the Zacks Consensus Estimate was pegged at a loss per share of a penny. Moreover, quarterly earnings reflect a sharp improvement from the year-ago quarter’s break-even earnings.

The company’s fiscal first-quarter revenues of $54.6 million marginally beat the consensus mark of $54 million. The top line increased 16% year over year. Its transition to a video AI company is a tailwind. However, softness in the automotive camera market slightly hurt Ambarella’s overall revenue growth in the quarter.

Ambarella’s CV portfolio is also attracting customers, helping it expand the client base. During the earnings conference call, the company revealed five new CV customers that it gained during the fiscal first quarter. Ambarella’s CV portfolio represented mid-single-digit percent in total revenues.

On a non-GAAP basis, the company reported gross margin of 59.1%, which was 50 basis points lower than the year-ago quarter’s figure. The fiscal first-quarter non-GAAP gross margin was toward the higher-end of management’s guided range of 57.5-59.5%.
 
Sequentially, non-GAAP operating expenses came in at $31.9 million compared with the year-ago quarter’s $29.9 million.

Ambarella ended fiscal first-quarter with cash and cash equivalents & marketable securities of $411 million, up from the $405 million recorded as of Jan 31, 2020. During the quarter, the company generated an operating cash flow of $7.6 million.

Outlook

For second-quarter fiscal 2021, revenues are expected to be $50 million (+/-6%). Non-GAAP gross margin is anticipated to be 59-60.5%. Non-GAAP operating expenses are projected at $31-$33 million.

Ambarella is concerned about the coronavirus pandemic’s impact on its China and non-China supply chains. The company expects order pushouts as well as cancellations to continue in the current quarter due to the coronavirus-led business disruptions.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -9.79% due to these changes.

VGM Scores

At this time, Ambarella has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. 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. It's no surprise Ambarella has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.