Ambarella (NASDAQ:AMBA) shares traded nearly 18% lower in pre-market Wednesday after the chipmaker reported a weaker-than-expected forecast.
For the first quarter, Ambarella reported a loss per share of $0.15 on revenue of $62.1 million (down 31% year-over-year), better than the consensus estimates for a loss per share of $0.20 on revenue of $61.99M.
“The cyclical headwinds persist and continue to pressure our financial results, but we are taking our inference AI strategy to the next level with our R&D investment focused on the build-out of our CV3 platform as well as new derivatives of our 3rd generation AI technology,” said CEO Fermi Wang.
The company expects Q2/24 revenue in the range of $60-$64M, missing the consensus estimate of $67.17M. Non-GAAP gross margin is expected to be between 62.5% and 64.5%.
KeyBanc analysts downgraded the stock to Sector Weight as they would like to get more "meaningful proofpoints" from Ambarella.
"We are downgrading AMBA to SW for the following reasons: 1) Despite the significant investments and traction in CV, we've seen limited design win traction in non-China auto. And while Rivian was a significant win, it was short-lived as AMBA lost the design. 2) While we were highly encouraged with the Continental/ Bosch wins, progress thus far has been limited to a L4 commercial trucking win," they said in a client note.
The analysts are also concerned about the AI pivot as it "could be a distraction from ultimately securing greater success in auto with CV3."
Stifel analysts cut the price target to $90 per share on Ambarella shares but remain Buy-rated.
"Although the NT environment remains uncertain, the company’s Computer Vision (CV) portfolio remains the LT focus. Notably, while the company’s CV3 platform is not expected to reflect material rev’s until the CY25E/CY26E time frame, we nevertheless continue to highlight the value of AMBA’s Tier-1 wins (e.g. Continental and Bosch) which we believe could help drive additional material design wins over the next 12-18+ months and further add to AMBA’s $2.3bn+ Automotive opportunity “funnel”," said analysts.
Additional reporting by Senad Karaahmetovic