Chardan Stays On The Sidelines Of Ambarella

• Ambarella Inc AMBA shares have been volatile so far in 2015, and have gained 14 percent year-to-date.
• Chardan’s Marc Estigarribia maintained a Hold rating on the company, while establishing a price target of $90.
• Although the company delivered an earnings beat, its guidance reflects weakness, Estigarribia said.

Ambarella’s reported its quarterly results broadly in-line with expectations. The company’s revenues came in at $93.2M, representing 41.9 percent y/y growth, with the camera market revenues surging 96 percent y/y and 90 percent q/q.

Ambarella generated non-GAAP gross margins of 65.9 percent, versus 63.4 percent in the year-ago quarter and 65.3 percent last quarter. Non-GAAP net income came in at $36.6M, or $1.08 per fully diluted share, up from last year’s $22.1M, or $0.68 per share.

“Wearables Sports Segment Weighs down Positive growth signs from its other segments, namely IP security, flying cameras (drones) and automotive aftermarket (dash cams), as company works hard to diversify,” analyst Marc Estigarribia wrote. He added that although the company has launched three new chips, the wearbles camera division could adversely impact growth for the next two quarters.

Management guided to FY4Q16 revenues of $65-$67.5M, representing 0-4 percent y/y growth. Revenue growth in the quarter is expected to be impacted by the inventory drag from the wearables sports camera market.

“The high inventory levels are expected to impact shipments though the next two quarters into FY1Q17 end April ‘16. The main offset drivers for the quarter should come from IP security, flying camera and auto aftermarket segments,” the Chardan report noted.