Ambarella (AMBA) Earnings: Hit Or Miss?

Ambarella Inc (NASDAQ: AMBA)

As expected, Ambarella reported their earnings for the most recent quarter after the closing bell yesterday. While earnings beat expectations, the overall report left investors with mixed feelings. Today, we’ll take a look at the report, talk about whether it was a hit or a miss and discuss what we can expect to see from the company moving forward. So, let’s get right to it…

Ambarella Beats Earnings Expectations

At first glance, it seems as though Ambarella’s earnings report was great. After all, the company beat both revenue and earnings expectations. Here’s what we saw on that front

  • Earnings Per Share – In the case of earnings per share, AMBA absolutely blew away analyst expectations. While analysts expected the company to report earnings in the amount of $0.86 per share, the company came in $0.22 ahead of expectations at $1.08 per share.
  • Revenue – Revenue was also a hit. While analysts expected AMBA to produce revenue for the quarter in the amount of $89.9 million, the company actually generated $93.2 million in the quarter. This represents year over year growth in the amount of 41.9%.

Looking at the results above, it’s easy to come up with the question… With such positive results, why are there mixed feelings? However, the mixed feelings are definitely warranted. Ultimately, it all falls on guidance. It’s great that AMBA produced strong results this quarter, but what about next quarter? Ultimately, investors want to see growth. When it comes to guidance for the fourth quarter, AMBA announced that it was lower than expected. Analysts expected for fourth quarter guidance to come in at $76.3 million. However, in the quarter, Ambarella only expects to generate between $65 million and $67.5 million. In a statement, Fermi Wang, AMBA CEO had the following to say with regard to earnings and guidance…

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… We are experiencing near term headwinds in the wearable sports market which is expected to negatively impact revenue in Q4 of this year.”

How Should Investors Take This Report

It’s clear that the wearable cameras Wang is talking about are GoPro cameras. However, at this point, I think that it’s time to create a disconnect between Ambarella and GoPro. Sure, I would love to see guidance come in stronger, however, we knew that GoPro was falling. Nonetheless, Ambarella’s moves into several new markets are opening plenty of doors. We may have a bit of a bad quarter next quarter, but over time, the value in the stock will be realized. With all of that said, I think that the report was a hit. This can also be seen by looking at the stock’s movement. While AMBA did fall substantially in after-hours trading following the earnings report, investors have shown their support throughout the day Friday, bringing AMBA into the green. Overall, I believe that this is a great stock to get involved in.

What Do You Think?

Where do you think AMBA is headed and why? Let us know your opinion in the comments below!