What happened

Shares of Ambarella (NASDAQ:AMBA) have soared today, up by 13% as of 12:05 p.m. EST, after the company reported third-quarter earnings that topped expectations. Ambarella also issued strong guidance for the fourth quarter.

So what

Revenue in the fiscal third quarter came in at $56.1 million, which was ahead of the $54.1 million that analysts were modeling for. That translated into adjusted net income of $3.3 million, or $0.09 per share, also topping the consensus estimate of $0.05 in adjusted profits. The vision processor technology company expanded adjusted gross margin from 58.1% a year ago to 62.7%.

Green stock chart going up

Image source: Getty Images.

"Our AI vision portfolio is well positioned for the megatrends around security, safety, and automation, and the pandemic appears to be accelerating the digital transformation," CEO Fermi Wang said in a statement. "We are announcing a significant automotive revenue funnel and providing a strong CV growth outlook."

Now what

Guidance for the fiscal fourth quarter, which ends Jan. 31, 2021, calls for revenue in the range of $56 million to $60 million, compared to the consensus estimate of $51.8 million. Adjusted gross margin is forecast at 59% to 61%, and adjusted operating expenses should be $31 million to $33 million.

Following the results, a slew of analysts increased price targets and/or upgraded the stock:

  • Needham: Reiterated buy rating, increased price target from $63 to $80.
  • Summit Insights: Upgraded from hold to buy.
  • Stifel Nicolaus: Maintained buy rating, boosted price target from $66 to $78.
  • Craig-Hallum: Reiterated buy rating, increased price target from $75 to $90.
  • Morgan Stanley: Maintained overweight rating, boosted price target from $79 to $83.
  • Roth Capital: Reiterated neutral rating, increased price target from $55 to $70.
  • Rosenblatt: Kept buy rating, boosted price target from $65 to $82.

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