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Why Ambarella Stock Glowed Green Today

By Rich Smith - Updated Mar 3, 2021 at 1:12PM

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Earnings astound, and guidance looks pretty good, too.

What happened

Shares of high-definition chipmaker Ambarella (AMBA 9.92%) took off like a rocket Wednesday, shooting up more than 20% before retracing to about a 6.4% gain in noonday trading, after the company reported a sizable earnings beat for the fourth quarter of fiscal 2021.

Heading into the quarter, analysts had predicted Ambarella would earn $0.08 per share pro forma on sales of $58.1 million. But Ambarella earned nearly twice as much, $0.14 per share, on sales of $62.1 million.  

Stock up glowing green arrow climbs on a stock screen

Image source: Getty Images.

So what

Ambarella's sales grew 9% year over year in the fourth quarter, a huge improvement over the results for the year as a whole, which were down 3% at $223 million. Gross profit margins earned on that revenue improved, for both the quarter at the year, to 60.8%, helping to deliver the earnings beat.

Actual earnings when calculated according to generally accepted accounting principles (GAAP) weren't quite as good as Ambarella's pro forma numbers, and that may be part of the reason it couldn't hold on to all its gains from earlier today. For the quarter, Ambarella lost $0.35 per share on a GAAP basis, and $1.72 for the year. The quarterly result was an improvement over last year, but the annual result was worse than last year's loss of $1.35 per share.

Now what

Looking to fiscal 2022 (Ambarella's financial calendar runs a year in advance of the actual calendar), the company anticipates that first-quarter revenue will range from $67 million to $70 million, a huge improvement over the less than $55 million the company collected in the year-ago period.

And considering that analysts are only forecasting sales of $56.4 million, Ambarella appears to be predicting a clear and convincing sales beat for the first quarter of 2022 -- no matter how bad the earnings look.

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