Please ensure Javascript is enabled for purposes of website accessibility

Why Ambarella Stock Soared Today

By Steve Symington - Nov 30, 2018 at 4:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The computer-vision market is starting to yield fruit for the video-processing chip company.

What happened

Shares of Ambarella (AMBA 6.41%) were up 19% as of 3:15 p.m. EST Friday after the video-processing chip designer announced third-quarter results and early design wins in the computer-vision market.

That's not to say Ambarella's results looked good at first glance. Quarterly revenue declined 35.7% year over year, to $57.3 million, while adjusted earnings slipped 75% to $7 million, or $0.21 per share. But Ambarella's latest guidance provided in August called for roughly the same revenue between $55.5 million and $58.5 million, and most investors would have settled for adjusted earnings of only $0.09 per share.

Camera view of vehicles and pedestrians being identified by a computer-vision chip

IMAGE SOURCE: AMBARELLA.

So what

"The short term revenue outlook continues to be under pressure as our business shifts away from consumer electronic applications and faces geopolitical and macroeconomic challenges, as we have previously discussed," stated Ambarella CEO Fermi Wang. "We are, however, very encouraged with our strategy and position at the forefront of the nascent computer-vision market."

Wang added that Ambarella not only secured its first computer-vision design wins in the automotive market this quarter but expects its first mass-production revenue in the current quarter from its cutting-edge CV series chips in the professional surveillance camera market.

Now what

Ambarella is targeting fiscal fourth-quarter revenue of roughly $51 million, plus or minus 3%. That's well below consensus estimates for revenue closer to $55.6 million and marks another decline of nearly 29% from the same year-ago period.

Nonetheless, with shares already down around 46% year to date going into this report, the market was more than willing to forgive Ambarella in light of its third-quarter earnings beat and the prospect of higher computer-vision sales down the road. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ambarella, Inc. Stock Quote
Ambarella, Inc.
AMBA
$72.86 (6.41%) $4.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.