Ambarella Stock Sinks as It Sees ‘Weak’ Demand Environment. What Wall Street Thinks.

Text size

Ambarella issued disappointing third-quarter guidance.



stock was tumbling Wednesday after the chip maker issued disappointing guidance, saying customers have been reducing their inventories.


(ticker: AMBA) said on its second-quarter earnings call Tuesday that it anticipates fiscal third-quarter revenue will decline to about $50 million, plus or minus 4%. That’s significantly below the $67.5 million estimated by analysts surveyed FactSet. That’s also a drop from the $83.1 million reported in the third quarter of 2022.

“The near-term environment is very challenging, as customers are now more aggressively reducing their inventory, and we are now seeing some
pockets of weak end-market demand, which further complicates our customers’ efforts to reduce their inventory,” Chief Executive Fermi Wang said in a press release.

Wang also said he expects customers’ inventory levels to normalize by the end of the year and “set us up for a return to growth in the next fiscal year.”

Shares of


were sinking 21% Wednesday to $59.88 and were on pace for their lowest close since November 2022 and largest percentage decrease since March 2022, according to Dow Jones Market Data. The stock has fallen 27% in 2023.

For its second quarter, the company reported a loss of 15 cents a share on revenue of $62.1 million. Analysts surveyed by FactSet were expecting a loss of 31 cents a share on revenue of $62 million.

“Ambarella’s profitability is in a tough spot. The company has huge ambitions, both in autonomous driving and now large-language models, two expensive endeavors,” Susquehanna analyst Christopher Rolland said in a research note. He lowered his price target to $80 from $92 but maintained his Positive rating on the stock.

See also  Innoviz, Luminar, Ouster emerge as likely winners in lidar shakeout

Needham analyst N. Quinn Bolton lowered his price target on the stock to $90 from $100, but maintained his Buy rating.

“We believe the overall story is intact and encourage investors to take advantage of any stock price weakness,” Bolton wrote in a research note Wednesday.

Stifel analyst Tore Svanberg cut his price target on the stock to $78 from $95 but also maintained his Buy rating. He wrote in a research note Wednesday that “the company’s business is clearly at a cyclical trough.”

“We believe there are very few SMID [small and mid] cap semiconductor stocks that are this well positioned in AI,” Svanberg added. “We believe long-term investors could see material returns from AMBA over-time, either as an organic entity or as a potential take-out candidate.”

Write to Angela Palumbo at [email protected]

Related Posts