AMBA Stock Hits 52-Week High on Robust Earnings and Guidance

AMBA stock

AMBA stock is one of the notable winners in Friday’s session after Ambarella Inc (NASDAQ:AMBA) reported Q2 profit and sales that exceeded analyst expectations. The company also provided Q3 revenue guidance above Wall Street projections.

Q2 Results

The company reported a wider net loss of $10.3 million or $0.31 per share in the quarter relative to a net loss of $6.9 million or $0.21 per share last year. Adjusted earnings per share dropped to $0.21 per share compared to last year’s $0.25 per share. Revenue also dropped by 10% to around $56.4 million from a year ago.

For the third quarter, Ambarella expects revenue to range from $63 million to $67 million. The company expects adjusted gross margin between 56% and 58% while adjusted operating expenses will be between $30 million and $32 million.

Ambarella has indicated that it is confident in its 2020 outlook despite the ongoing geopolitical uncertainty. In a statement, the Chief Executive, Fermi Wang, indicated that the company is progressing well with its transformation strategy. He added that they want to transform the company into an Artificial Intelligence video company from a pure video processing company. He said that in the second quarter, the company began mass production CV system-on-a-chip shipments with CV25 being the company’s second CV SoC to generate revenue.

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At the time of writing, AMBA stock is up a whopping 17% at $55.40. The stock made a new 52-week high of $56.65 earlier in the session.

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Ambarella Expected Trade Tariffs to Impact Its Results

The company does, however, expect the proposed public policy changes to impact business. The trade tariff conflict between the US and China is expected to continue creating uncertainty in the market. The company has indicated that more tariffs or trade restrictions imposed on its products will immensely affect its results.

Currently, the global semiconductor market is very competitive, especially the video and image processing segment. The company is expecting competition to grow and intensify as more semiconductor companies join the market. The competition will also be enhanced by current competitors who are improving their products as well as expanding their offerings. Increase in competition does not bode well with Ambarella because this will lead to a decline in profitability, price pressure, as well as a loss of market share.

AMBA stock is up 50% so far this year.

What do you think of Ambarella after the recent rally?

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