Ambarella
stock was tumbling Wednesday after the chip maker issued disappointing guidance, saying customers have been reducing their inventories.
Ambarella
(ticker: AMBA) said on its second-quarter earnings call Tuesday that it anticipates fiscal third-quarter revenue will decline to about $50 million, plus or minus 4%. That’s significantly below the $67.5 million estimated by analysts surveyed FactSet. That’s also a drop from the $83.1 million reported in the third quarter of 2022.
“The near-term environment is very challenging, as customers are now more aggressively reducing their inventory, and we are now seeing some
pockets of weak end-market demand, which further complicates our customers’ efforts to reduce their inventory,” Chief Executive Fermi Wang said in a press release.
Wang also said he expects customers’ inventory levels to normalize by the end of the year and “set us up for a return to growth in the next fiscal year.”
Shares of
Ambarella
were sinking 21% Wednesday to $59.88 and were on pace for their lowest close since November 2022 and largest percentage decrease since March 2022, according to Dow Jones Market Data. The stock has fallen 27% in 2023.
For its second quarter, the company reported a loss of 15 cents a share on revenue of $62.1 million. Analysts surveyed by FactSet were expecting a loss of 31 cents a share on revenue of $62 million.
“Ambarella’s profitability is in a tough spot. The company has huge ambitions, both in autonomous driving and now large-language models, two expensive endeavors,” Susquehanna analyst Christopher Rolland said in a research note. He lowered his price target to $80 from $92 but maintained his Positive rating on the stock.
Needham analyst N. Quinn Bolton lowered his price target on the stock to $90 from $100, but maintained his Buy rating.
“We believe the overall story is intact and encourage investors to take advantage of any stock price weakness,” Bolton wrote in a research note Wednesday.
Stifel analyst Tore Svanberg cut his price target on the stock to $78 from $95 but also maintained his Buy rating. He wrote in a research note Wednesday that “the company’s business is clearly at a cyclical trough.”
“We believe there are very few SMID [small and mid] cap semiconductor stocks that are this well positioned in AI,” Svanberg added. “We believe long-term investors could see material returns from AMBA over-time, either as an organic entity or as a potential take-out candidate.”
Write to Angela Palumbo at [email protected]
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