A light quarterly earnings guidance sent shares of Ambarella (AMBA) lower but the reaction looks overdone. The company continues to make strong inroads in automotive applications. Though the drop in its share price is understandable, given its 41x P/E, the stock should interest patient, growth investors.
Q4 Results
Ambarella reported revenue growing 28.7% Y/Y, to $87.5 million and earnings of $0.92 per share. Gross margin improved to 67.2 percent, up from 64.1 percent. The bad news is that the company issued a revenue outlook that is below consensus for Q1. Revenue may fall to as low as $62.5 million (versus the ~$70M consensus). For a company that lessened its dependence on GoPro (GPRO), AMBA is doing very well. Still, revenue from GoPro still grew from 18% of revenue to 34%. The camera market without GoPro grew a steady 7 percent Y/Y. Revenue from GPRO for the year fell:
“For the year ended January 31, 2017, revenues declined 1.9% to $310.3 million. GoPro total revenues, including sales directly to GoPro and their ODMs is estimated to have declined from approximately 30% of revenue in the prior year to 24% in the fiscal year-end 2017”
Source: Seeking Alpha
Looking ahead, AMBA will grow its business in IP security, automotive, and non-sports wearable. Q4 still benefited from GPRO’s HERO5 product sales, but AMBA only counts direct shipments. High inventory levels for GoPro will drag performance in the near-term.
AMBA shareholders need a multi-quarter timeline. Those not holding the stock may find a better entry point soon.
