Why Ambarella Earnings Aren't Enough to Overcome Its Outlook

Technology

Published: December 3, 2015 4:39 pm

Last Updated: January 13, 2020 4:29 pm

Ambarella, Inc. (NASDAQ: AMBA) reported its fiscal third quarter financial results after the markets closed on Thursday. The company had $1.08 in earnings per share (EPS) on $93.2 million in revenue compared to consensus estimates from Thomson Reuters that call for $0.86 in EPS on $89.90 million in revenue. The same period from the previous year had $0.68 in EPS on $65.69 million in revenue.

Despite posting a strong quarter, the outlook is really what investors are calling into question. Keep in mind that Ambarella is a cult stock, and in this case the outlook is more important than the actual numbers for the current quarter. Granted this is just the initial take in the after-hours session.

In terms of guidance the company expects net income to be in the range of $15.0 million to $17.0 million and revenues to be in the range of $65.0 million to $67.5 million in the fiscal fourth quarter. For a point of reference, net income for the fiscal third quarter totaled $36.6 million compared to $22.1 million in the same quarter from the previous year. Consensus estimates for the fiscal fourth quarter call for $0.60 in EPS on $76.30 million in revenue.

Fermi Wang, President and CEO of Ambarella, commented on earnings:

Our strong third quarter results reflect our success in expanding revenues in new markets such as flying cameras and home security monitoring, as well as existing markets for professional IP security cameras and automotive after-market dash cameras. Although we expect these markets to continue their strong annual growth, we are experiencing near term headwinds in the wearable sports market which is expected to negatively impact revenue in Q4 of this year. Despite the near term headwinds, we are very pleased by the wide range of new cameras introduced by customers during the third quarter, and by our introduction of three new SoC families that will drive the next generation of innovative camera products.

On the books, total cash, equivalents, and marketable securities was $276.7 million at the end of the third quarter, compared with $186.5 million at the end of the same period last year.

Shares of Ambarella closed Thursday down 4.3% at $57.88, with a consensus analyst price target of $91.44 and a 52-week trading range of $44.45 to $129.19. Following the release of the earnings report, shares were initially down 6% at $54.40 in the after-hours trading session.

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