Shares of semiconductor design company Ambarella (AMBA) rallied 13.6% in Tuesday’s extended trading session after it reported better-than-expected results for the third quarter of Fiscal Year 2022 (ended October 31, 2021).
Revenues rose 64% year-over-year to $92.2 million and surpassed analysts’ expectations of $90.4 million. (See Ambarella stock charts on TipRanks)
Meanwhile, adjusted earnings of $0.57 per share also beat the consensus estimate of $0.49 per share. The figure compares favorably with the earnings of $0.09 per share reported in the same quarter last year.
While research and development expenses rose 13.1% year-over-year to $41.4 million, selling, general and administrative costs increased 20.8% to $17.5 million.
The President and CEO of Ambarella, Fermi Wang, said, “Our operational execution remains strong, yet supply dynamics remain difficult to predict, as shortages of other companies’ components has become a more significant and gating factor to our results and outlook.”
For the fourth quarter, Ambarella expects to generate revenues in the range of $88.5 million to $91.5 million. Gross margin on an adjusted basis is expected between 63% and 64%.
Further, adjusted operating expenses are expected to range from $39 million to $41 million due to higher SoC development expense, increased hiring and the inclusion of Oculii’s operations.
Following the release, Rosenblatt Securities analyst Kevin Cassidy maintained a Buy rating on the stock and raised the price target to $250 from $210. The new price target implies 39.3% upside potential from current levels.
Cassidy said, “We continue recommending the AMBA shares as a pure play in our Age of AI Scaling investment theme. Ambarella’s 5+ year investment in a ground up computer vision architecture SoC is paying off. With the combination of future 5nm and 3nm-based CV SoCs plus software that includes radar, we see the company’s opportunities accelerating.”
The stock has a Strong Buy consensus rating based on 7 Buys and 1 Hold. The average Ambarella price target of $199.63 implies 11.2% upside potential from current levels. Shares have gained 128.1% over the past year.
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