Key Points
- Institutional support for Ambarella continues to grow.
- Its Q3 results were good but the guidance is weak.
- Near-term headwinds are offset by a major win in the automotive industry.
Ambarella (NASDAQ: AMBA) shares are down more than 65% from their post-pandemic highs and may move lower. The Q4 results were good but guidance is on the weak side. That may weigh on share prices, but that's a good thing. Ambarella stock is up off of its recent lows and at a high 68x valuation, so a pullback in prices could be an opportunity for investors.
Based on the institutional activity over the past 12 months, it shouldn't surprise you when the stock doesn’t move down to a new low. The institutions have been very active in this name over the past year but bullish activity is more than double bearish activity. The bulls netted 18% of the stock based on the recent market cap. Their total holdings are up to 77% of the stock and growing, which is a solid foundation for a rally to build.
Insiders and Analysts Holding on to Ambarella
The insiders own about 6.6% of Ambarella and haven’t been selling the stock this year. The last major sales were in Q1 and the activity since is small and broad-based and in line with the periodic liquidation of share-based compensation. Some major shareholders on the institutional end include Vanguard and BlackRock, which own a little more than 15% of the company between them. They have the stock pegged at a "moderate buy." The price target trends lower but still implies more than 45% of upside at the midpoint consensus mark. The only major analyst report out since the Q3 release is from Deutsche Bank, which held and holds the new low target of $60.
Ambarella had a tough quarter in Q3 and offers weak guidance, but take that with a grain of salt. The results are as expected on the revenue end and margins came in better than expected, driving solid results on the bottom line. The $83.1 million in revenue is down about 10% from last year but that is in relation to a tough comp and suffering from the downturn in the semiconductor industry. The guidance is the worst part of the report. The top end of the revenue range is below the consensus figure, but the company has made material progress on its revenue pipeline. This will drive results over the long term.
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“Our Q3 results were mostly as expected, despite the material headwinds from the semiconductor industry cyclical downturn,” said Fermi Wang, president and CEO. “We maintained a high level of focus on developing our edge AI endpoint products which we see continuing to offer very favorable secular growth opportunities. Continental AG was the first company to announce the integration of CV3 into their ADAS product lines and more CV3 updates are anticipated in the next several quarters. Our projected automotive revenue funnel grew approximately 28% from a year ago.”
Ambarella: Well-Positioned for the Downturn
Not only are Ambarella products at the cutting edge of today’s technology and in demand, but the company is in a good position to weather the semiconductor downturn. The cash balance is down year-over-year due to the Occuli acquisition but rising on a sequential basis. It allows the company to invest in securities and restrengthen its overall position.
Shares of Ambarella are down in early trading and confirming resistance at the 150-day moving average but the downtrend is more than likely over. The stock may retreat to find firm support before it rebounds again but that support should kick in around the $60 range if not higher, assuming the institutions will buy on the dip. Longer term, this stock should move higher once the general outlook for semiconductors clears a bit.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Ambarella (AMBA) | $62.19 | +1.5% | N/A | -14.40 | Moderate Buy | $74.09 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
