Karishma Vanjani
Stock in Ambarella soared early Wednesday morning after the semiconductor company offered a solid financial outlook while signaling that inventory issues it has faced are largely over.
Wall Street mostly recommends buying the stock.
The Santa Clara, Calif., company sells chips used in video recording and streaming, as well as elsewhere in consumer electronics, such as in electronic mirrors and for autonomous driving. Shares declined 26% last year and were down 14% this year as of the close on Tuesday, at least partly because automotive companies and other customers have been working through excess inventory, which hurts sales for Ambarella.
Ambarella's stock is now nearly positive for the year. Shares were up 15% to $60.38 shortly after Wednesday's open.
Ambarella released its financial results after the close of trading on Tuesday and forecast that revenue for the quarter ending in October will come in between $77 million and $81 million. Analysts were looking for $69 million.
CEO Fermi Wang said inventory burn, or efforts to align its own product stockpiles with slower demand, is down and that customers are "booking in a regular speed."
Nearly 60% of analysts tracking the stock on FactSet are positive on the company now. Needham's Quinn Bolton expects the stock to move 70% higher from its closing price on Tuesday.
The "cyclical downturn appears to be over," Bolton wrote on Wednesday. He has had a Buy rating on the stock since late 2021, a year when the company delivered a 121% return on its shares. The stock fell almost 60% in 2022, before the losses in 2023 and this year.
John Vinh at KeyBanc is more cautious. "We await further proofpoints related to CV3 and generative AI," he wrote. The CV3 chip is tailored for use in cars, particularly for advanced driver assistance such as adaptive cruise control and lane-keeping assistance.
Vinh has rated Ambarella at Sector Weight, the equivalent of Neutral, since May last year. Until then, he had recommended buying the stock since September 2021.
Analysts' ratings can shift, moving sometimes to keep pace with a stock's move. Still, their knowledge and analysis can offer valuable insights, serving as a useful reference for investors to use in evaluating their own views on a company.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
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(END) Dow Jones Newswires
August 28, 2024 10:06 ET (14:06 GMT)
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