Ambarella (AMBA) To Report Earnings: Here's A Preview

Ambarella Inc (NASDAQ: AMBA)

Ambarella is a developer of low-power, high definition video compressing and imaging processing products. Pretty soon, the company is expected to report earnings. After a poor earnings report last quarter, investors are hoping that this quarter will bring positive news. Today, we’ll take a look at what we saw during the last earnings report, what we can expect to see from this earnings report and of course, what we can expect to see from AMBA moving forward.

Ambarella’s Q2 Earnings Report

As mentioned above, Ambarella didn’t do great with their Q2 earnings report. Unfortunately, the company missed earnings expectations. While analysts expected to see Q2 earnings per share come in at $0.73 per share, the company actually produced $0.72 per share. However, the miss wasn’t terrible and investors responded positively considering the circumstances.

Will Ambarella Report Positive Q3 Earnings?

AMBA is expected to report earnings on Thursday, December 3rd. One of the big concerns among investors has been GoPro. Ambarella’s claim to fame has been the fact that their biggest customer has been GoPro. However, GoPro isn’t doing very well. Unfortunately, the company’s sales have been less-than thriving and there are concerns that the target audience for the extreme athlete cameras simply isn’t large enough for sales to rise. Because GoPro is AMBA’s largest customer, reductions in sales at GoPro will likely mean reductions in sales at Ambarella. However, some analysts don’t believe that will be the case. For example, Kevin Cassidy believes that the earnings report will prove to be a positive catalyst as AMBA decouples itself from GoPro.

Essentially, Cassidy believes that AMBA can increase sales between 20% and 25% annually “thanks to new video applications”. His opinion is based on changes in consumer habits. You see, in the beginning Ambarella’s growth was based on the sports camera market. However, with a new wave of automobile cameras and other new video applications, Ambarella’s target audience is growing quickly.

When it comes to AMBA, I have to agree with Kevin Cassidy. The bottom line here is that GoPro has carved out its own small niche while Ambarella has created video processing chips that have the ability to be used in a wide range of indications. Based on the new applications in the growing video industry, I believe that investors are going to be surprised when we see earnings from AMBA.

How AMBA Is Likely To React To Earnings

When Ambarella reports earnings, we are going to see one of two reactions…

  • Highly Likely – The most likely event here is that Ambarella produces a positive earnings surprise. When this happens, investors will be excited to see that AMBA is not attached at the hip to GoPro. Instead, they are working on expanding their market, which will lead to profits. With the positive surprise in mind, AMBA is likely to climb dramatically.
  • Highly Unlikely – While it is a possibility that AMBA will produce a negative earnings report, it is a possibility nonetheless. If this were to happen, concerns would grow and Ambarella would fall. Nonetheless, I think that this is the least of concerns here.

What Do You Think?

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