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Why Ambarella Stock Jumped 10% This Week

By Demitri Kalogeropoulos – Dec 3, 2021 at 9:11AM

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Profitability is rising as more manufacturers sign up for its computer vision platform.

What happened

Shares of Ambarella (AMBA -4.25%) beat the market by a wide margin this week. The stock rose 10% through Thursday trading, compared to a 1.7% decline in the S&P 500. The semiconductor chip tech developer announced positive operating news early in the week.

So what

Sales for the fiscal third quarter jumped 64% to $92 million, management revealed after the market closed on Tuesday. That result matched the top end of the guidance range that executives had issued three months earlier.

It also put the company in a great position to meet or exceed its wider goals for the full fiscal year.

An engineer working on a semiconductor chip.

Image source: Getty Images.

Ambarella's profitability was similarly impressive, thanks to robust demand for premium products in its AI and computer vision chip platforms. "Our market and financial momentum was strong in Q3," CEO Fermi Wang said in a conference call with investors.

Now what

Management cited ongoing supply chain issues that are impacting fabrication rates. But Ambarella is still expecting to set sales records this year, with revenue in Q4 likely to reach between $89 million and $92 million. Executives are especially excited about their acquisition of Oculii, which gives the company access to a growing computer imaging niche.

Investors will be watching average prices over the next few quarters because increases there are powering profits and are directly linked to Ambarella's ability to sell more computer vision platforms.

If these products continue gaining market share, and if supply challenges don't slow its momentum, then Ambarella has a good shot at generating faster sales growth paired with rising margins in 2022.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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