Computer-vision chipmaker Ambarella beat Wall Street's targets for its fiscal second quarter but forecast sales for the current period that were well below estimates. AMBA stock tumbled Wednesday on the news.
The Santa Clara, Calif.-based company late Tuesday said it lost an adjusted 15 cents a share on sales of $62.1 million for the quarter ended July 31. Analysts polled by FactSet had expected Ambarella to lose 21 cents a share on sales of $62 million. In the year-earlier period, Ambarella earned an adjusted 20 cents a share on sales of $80.9 million.
For the current quarter ending Oct. 31, Ambarella expects sales of $50 million. Wall Street had called for revenue of $67.9 million in the fiscal third quarter. In the same quarter last year, Ambarella posted sales of $83.1 million.
Ambarella also sees its adjusted gross profit margin declining to a range of 62% to 64% in the third quarter. Its gross margin in the second quarter was 64.6%.
AMBA Stock Takes A Dive
On the stock market today, AMBA stock plunged 20.4% to close at 60.34. During the regular session Tuesday, AMBA stock jumped 4.5% to close at 75.78.
"The near-term environment is very challenging," Chief Executive Fermi Wang said in a news release. "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."
Inventory levels should normalize by the end of the year, he said. Wang expects Ambarella to return to growth in the next fiscal year.
AMBA Stock Has Subpar IBD Composite Rating
Ambarella describes itself as "an edge AI semiconductor company." It makes processors for computer vision systems and video surveillance cameras. Its products are used for video security, advanced driver-assistance systems, autonomous driving and robotic applications.
At least 10 Wall Street firms cut their price targets on AMBA stock after the earnings report. Also, TD Cowen downgraded Ambarella to market perform from outperform.
Ambarella is dealing with excess inventory in the surveillance camera markets, Morgan Stanley analyst Joseph Moore said in a note to clients. Also, the company's initiatives in artificial intelligence and automotive will take time to play out, he said.
Ambarella ranks No. 19 out of 36 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. AMBA stock has an IBD Composite Rating of 43 out of 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
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