Markets

Ambarella (AMBA) Q2 Earnings: Is Disappointment in Store?

Ambarella Inc.AMBA is slated to release second-quarter fiscal 2019 results on Aug 30.

Notably, Ambarella beat estimates in the trailing four quarters, with an average positive surprise of 21.6%.

In the last reported quarter, the company posted mixed results, wherein earnings surpassed the Zacks Consensus Estimate but revenues marginally fell short of the same. Moreover, on a year-over-year basis, its top- and bottom-line registered decline.

For second-quarter fiscal 2019, revenues are expected between $60 million and $64 million (mid-point $62 million), down 10.6-16.2% from the year-earlier quarter.

The Zacks Consensus Estimate for the quarter under review is pegged at earnings of 13 cents, which reflects a year-over-year decline of 72.9%. Additionally, the consensus estimate for revenues is $62.3 million, indicating 13% decline from the year-ago quarter.

Ambarella, Inc. Price and EPS Surprise

Ambarella, Inc. Price and EPS Surprise | Ambarella, Inc. Quote

So, let's see how things are shaping up prior to this announcement.

Key Factors

Ambarella is well known for its market leading high performance video processing system on a chip (SoCs), which consume the lowest power in this space, providing it a cost and power advantage over its rivals. The company is benefiting from automotive and IP security markets which, per management, represent a large and expanding opportunity.

However, the company is hurt by considerable decline in revenues from the drone market. Per the company, drone manufacturers have been witnessing a tough time and its major clients are now shifting focus on building low-priced drones. Moreover, weakness in sports and the VR camera markets poses significant concern.

The company anticipates GoPro GPRO revenues to be insignificant to the soon-to-be-reported-quarter. Moreover, the trade war between the United States and China is a significant risk for the company's growth prospects.

Furthermore, increase in China security revenues and decline in drone revenues are anticipated to impact margins negatively. Increase in operating expenses due to "increased chip tape out fees and engineering headcount" will remain an overhang.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Ambarella currently carries a Zacks Rank #3 but has an Earnings ESP of -5.92%.

Stocks With a Favorable Combination

Here are two companies, which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Entegris, Inc. ENTG has an Earnings ESP of +0.51% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

SCIENCE APPLICATIONS SAIC has an Earnings ESP of +1.70% and a Zacks Rank #3.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Entegris, Inc. (ENTG): Free Stock Analysis Report

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION (SAIC): Free Stock Analysis Report

Ambarella, Inc. (AMBA): Free Stock Analysis Report

GoPro, Inc. (GPRO): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AMBA ENTG SAIC GPRO

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More