Ambarella stock poised for gains as CV product family drives growth - Stifel

On Wednesday, Stifel maintained a positive outlook on Ambarella (NASDAQ:AMBA), increasing its price target to $80 from $75 while keeping a Buy rating on the stock.

The firm's optimism is based on the company's second consecutive guidance raise, which indicates a solid growth trajectory. Ambarella's customers have largely finished their inventory rebalancing, providing a clearer view of future demand.

Despite challenges in the broader macroeconomic environment, such as an expected sequential decline in global auto production, Ambarella is poised to benefit from the increasing adoption of its computer vision (CV) product families. The CV5 family, in particular, is expected to perform exceptionally well, with shipments projected to 'easily exceed one million units' this year.

The firm's confidence is further bolstered by Ambarella's potential for significant year-over-year percentage growth in the mid to high double digits by the end of the fiscal year 2025. This anticipated growth is largely attributed to the introduction of new products. The analyst's remarks underscore a strong belief in Ambarella's capacity to grow in both the near term (NT) and long term (LT).

Ambarella's strategic focus on its CV product families appears to be a key driver of its expected growth. The company's ability to navigate the inventory rebalancing of its customers and the positive outlook on its product shipment volumes reflect a robust business model capable of weathering macroeconomic headwinds.

In summary, Stifel's revised price target for Ambarella reflects a renewed confidence in the company's growth prospects, underpinned by successful product family ramps and a clear path to significant revenue increases in the coming years. The firm's analysis suggests that Ambarella is well-positioned to capitalize on its strengths and continue its upward trajectory.

In other recent news, Ambarella has reported a narrower adjusted loss of $0.13 per share for Q2, beating analyst estimates of a $0.19 per share loss. This comes alongside a 3% year-over-year increase in revenue, which was reported at $63.7 million, surpassing the consensus of $62.1 million. Furthermore, the company's guidance for the third quarter indicates revenue between $77 million and $81 million, significantly outperforming Wall Street's expectations of $69 million.

Deutsche Bank maintained its Hold rating on Ambarella, with the price target remaining at $65. The financial institution acknowledged Ambarella's strong performance and optimistic guidance, but opted for a cautious outlook for the calendar year 2025.

In addition to the financial results, Ambarella is also seeing the benefits of specific product cycles, such as CV5, and is expected to have growth driven by new product introductions, especially in the IoT sector and later in the automotive industry. Despite some projected seasonal challenges, the company expects design wins and ramps in its CV5, CV7, and CV3 product lines over the next 12 to 24 months.

Finally, Ambarella reported a non-GAAP gross margin of 63.3% in Q2, a slight decrease from 64.6% a year ago. For Q3, the company expects a non-GAAP gross margin between 62.5% and 64%. These recent developments highlight Ambarella's continued strong position in the market.

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