Analysts slashed their price targets on Ambarella, Inc (NASDAQ:AMBA) post Q1 results. Wells Fargo analyst Gary Mobley maintained Ambarella with an Overweight and lowered the price target from $125 to $110.
Mobley's re-rating followed relatively in-line 1Q23 results & a weak 2Q23 guide for AMBA, an outlook that considers the ripple effect of COVID lockdowns in China. He expected these issues to be transitory and suggested investors buy shares of AMBA on any resulting weakness.
To adjust for lower peer group multiples and lower near-term estimates, Mobley cut the price target.
Mobley saw investors care the most about AMBA seeing disruption related to China COVID-19 mitigation efforts & related supply issues. China accounts for only 15% of AMBA's end-market consumption, but most customers have manufacturing operations in China.
Needham analyst Quinn Bolton maintained Ambarella with a Buy and lowered the price target from $175 to $120. AMBA's 1Q23 results were in-line or better than guidance, but China lockdown headwinds and customers delaying orders due to kitting issues were the main focus of the earnings call.
Bolton believes this is the peak of China/supply headwinds. The analyst remained firm in believing that AMBA is ready for sustained growth driven by new CV product cycles.
Keybanc analyst John Vinh maintained Ambarella with an Overweight and lowered the price target from $160 to $120. AMBA reported in-line 1Q results and guided 2Q lower primarily due to the China COVID lockdowns, exacerbating kitting issues and negatively impacting AMBA's customer supply chain.
F2Q headwinds from Samsung Electronics Co, Ltd (OTC: SSNLF) wafer shortages at 14nm remain unchanged at ~$5 million, with supply likely to improve Q/Q in both 3Q and 4Q.
Fundamental demand for CV remains strong, reaching 40% in the quarter, and remains on track to represent 45% of FY23 revenues. Vinh lowered estimates and price target to $120 primarily to reflect peer multiple contractions.
Rosenblatt analyst Kevin Cassidy maintained Ambarella with a Buy and lowered the price target from $200 to $125. China shutdowns, IC kitting shortages, and foundry shortages have Ambarella management guiding for an 11% sequential revenue decline during the July quarter.
Expectations are for sequential growth in 2HF23 from this lower base. The management's strategy remains solid, as per Cassidy.
Ambarella's CVflow architecture redefines inference artificial intelligence at the network edge from a price/performance/power point of view. Cassidy continues to be impressed with the company's pipeline of brand-name design wins.
The analyst saw the lower than expected July quarter guide as a reset the market anticipated. While Cassidy reduced estimates, he believes that the new forecast may be conservative with fewer China lockdowns and gradual improvement in semiconductor supply.
Price Action: AMBA shares traded lower by 2.89% at $82.76 on the last check Wednesday.
Photo via Wikimedia Commons
