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Ambarella Surges On Q2 Revenue Beat, Despite Concerns Around China Customers

Dave Royse

Ambarella Inc (NASDAQ: AMBA) stock continued to surge Friday after the camera chip maker posted a second-quarter revenue and earnings beat. 

KeyBanc Capital Markets raised its revenue estimates for Ambarella after the print. 

The Analyst

John Vinh maintained a Sector Weight rating on the stock.

The Thesis

Ambarella’s strong performance was driven in part by recovery in demand for two big Chinese security camera makers, HikVision and Dahua, both of which came under scrutiny by U.S. officials last year, with concerns that restrictions could be placed on companies doing business with them over national security issues involving facial recognition and espionage.

Inventory building in response to concerns of a ban was a major driver of Ambarella’s strong results, Vinh said in a Thursday note. (See his track record here.) 

It’s not clear how long that will last, though.

Still, overall security demand in China should continue for the next few quarters, the analyst said, adding that the company is also seeing share gains elsewhere.

But the company, which used to be known mostly as a key GoPro Inc (NASDAQ: GPRO) supplier, is also moving into a new business, providing “computer vision” chips for the automotive market, he said. 

“While still early days, auto represents half of the 40 pre-production customers with broad-based applications,” Vinh said.

Unfortunately, it could take a while.

“Given the longer design cycle, meaningful Auto CV revenues are expected by 2022-2023, while current auto growth is largely driven by video recorder ramps,” the analyst said. 

KeyBanc raised its full-year 2020 revenue estimate from $206 million to $225 million.

Price Action

Ambarella shares were up 17.94% at $55.87 at the close Friday. 

Related Links:

Despite China Overhang, Morgan Stanley Remains An Ambarella Bull

Ambarella Analysts See Long-Term Opportunity In Computer Vision

Latest Ratings for AMBA

Date Firm Action From To
Aug 2019 Maintains Neutral
Aug 2019 Maintains Outperform
Aug 2019 Maintains Overweight

View More Analyst Ratings for AMBA
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