Ambarella Inc (AMBA): Make a Move or Wait?

Oppenheimer's Andrew Uerkwitz feels the need to temper expectations by telling investors Ambarella is still a risky play near-term.


Ambarella Inc (NASDAQ:AMBA) shares are soaring nearly 18% in Friday’s trading session, after the video chip maker reported solid fiscal third-quarter results. Specifically, the company posted EPS of $0.75 on revenue of $89.1 million, beating consensus estimates of $0.67 and $89 million, respectively. In addition, Ambarella forecast F4Q18 revenue of $68-72 million, compared to consensus estimates of $70 million.

However, Oppenheimer analyst Andrew Uerkwitz approaches AMBA from the sidelines, as weakness in drones and wearables adds to his concern for near-term volatility. As such, Uerkwitz reiterates a Perform rating on the stock, without providing a price target (To watch Uerkwitz’s track record, click here)

“Our thesis on AMBA is unchanged,” says Uerkwitz. “We remain on the sidelines while the company navigates temporary headwinds in action camera and drone markets. We look forward to calendar 2018, when AMBA’s auto and security customers will begin to validate the commercial viability of its computer vision chipsets.”

To the company’s credit, the analyst believes the CV products offer interesting long-term potential. “AMBA has been demonstrating its CV1 to security and automotive customers. So far, customer feedback has been positive and management believes the product is meeting targets regarding features, performance, and power consumption. As a result, AMBA is accelerating 2nd gen CV chip development. The security market is likely to be the first to see commercial application, followed by automotive,” Uerkwitz noted.

Overall, Wall Street is pretty evenly split between the bulls and bears. According to TipRanks analytics, based on 6 analysts polled in the past 3 months, 3 rate a Buy on AMBA stock, while 3 rate the stock a Hold. The 12-month average price target stands at $63, marking a nearly 16% upside from where the stock is currently trading.

Every day, Wall Street analysts upgrade some stocks, downgrade others, and “initiate coverage” on a few more. But do these analysts even know what they’re talking about? TipRanks found a solution.