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Rosenblatt boosts Ambarella stock by $15 as Automotive and IoT markets drive momentum

Published 27/11/2024, 13:54
Rosenblatt boosts Ambarella stock by $15 as Automotive and IoT markets drive momentum
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On Wednesday, Rosenblatt Securities adjusted its outlook on Ambarella (NASDAQ:AMBA), a leading developer of artificial intelligence (AI) system-on-chip (SoC) technology. The firm increased the price target on the company's shares to $100.00, up from the previous target of $85.00, while reiterating a Buy rating.

The revision follows Ambarella's recent financial performance, which surpassed expectations with a strong beat-and-raise report. The company's success is attributed to the ramp-up of new, higher-priced products in the Automotive and Internet of Things (IoT) sectors. These developments are anticipated to fuel year-over-year revenue growth in fiscal year 2026 across both market segments.

Despite a forecasted seasonal decline in revenue for the first quarter of fiscal year 2026, the outlook remains positive due to a robust product cycle. Ambarella's management also updated its 6-year Automotive opportunity funnel, which provides a projection of potential business in the evolving automotive industry. While the total value of the funnel has decreased to $2.2 billion from $2.4 billion compared to the previous year, the value of business won has stayed steady at $800 million. This consistency is seen as a favorable sign for the company's future prospects.

Rosenblatt's endorsement of Ambarella's stock is backed by the company's leadership position in AI SoC technology. The firm's analysis suggests that Ambarella's innovative product offerings and strategic market positioning continue to offer a compelling investment opportunity.

In other recent news, Ambarella has been making significant strides in its financial performance and product development. The semiconductor design company recently reported a 63% year-over-year revenue increase to $82.7 million in the third quarter, surpassing expectations. This robust revenue growth is largely attributed to the company's AI and edge computing solutions, particularly in the automotive and Internet of Things (IoT) sectors.

Ambarella's AI-related revenue now constitutes approximately 70% of the total revenue, marking a record contribution. The company's automotive project funnel is valued at around $2.2 billion, despite facing project delays and cancellations. Ambarella is actively pursuing additional contracts for its AI System on Chips (SoCs), with a focus on the automotive and IoT markets.

In response to these developments, Susquehanna maintained a positive rating on Ambarella shares, increasing the price target to $85 from $70. Stifel, another financial services firm, also raised its price target for Ambarella from $80.00 to $95.00 and maintained a buy rating. Both firms expressed confidence in Ambarella's sustained AI-driven growth across the automotive and IoT sectors.

Looking ahead, Ambarella provided a midpoint revenue guidance of $78.0 million for the fourth quarter of fiscal year 2025. The company also forecasts a 22-24% revenue growth for fiscal 2025, with continued growth expected in both automotive and IoT segments into fiscal 2026.

InvestingPro Insights

Ambarella's recent financial performance and Rosenblatt's optimistic outlook are further supported by real-time data from InvestingPro. The company's stock has shown impressive momentum, with a 29.59% price return over the last three months and a significant 36.49% return over the past six months. This aligns with the positive sentiment expressed in the article regarding Ambarella's product cycle and market positioning.

InvestingPro Tips highlight that 13 analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in Ambarella's financial prospects. This corroborates Rosenblatt's bullish stance and the company's beat-and-raise report mentioned in the article.

Despite the strong recent performance, investors should note that Ambarella is trading near its 52-week high, with the current price at 98.36% of that level. This high valuation is reflected in the company's price-to-book ratio of 5.16, indicating that the market has high expectations for future growth.

For readers interested in a deeper analysis, InvestingPro offers 11 additional tips that could provide further insights into Ambarella's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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