Ambarella Soars On Earnings Beat, Deals With Rivian And Uber

Shares of Ambarella (AMBA) jumped on Wednesday after the chipmaker reported better-than-expected quarterly results and guidance, and discussed its recent deals with electric vehicle-maker Rivian (RIVN) and ride-hailing company Uber (UBER). Following the news, several Wall Street analysts raised their price targets on the shares, with Morgan Stanley analyst Joseph Moore arguing that "the headline" from the company's earnings report will be its commentary that its automotive "funnel" of six-year revenue potential tripled to $1.8B from the $600M forecast provided a year ago.

RESULTS: Ambarella reported third-quarter earnings per share of 57c and revenue of $92.17M, above consensus expectations of 49c and $90.35M, respectively. The company also said it sees fourth-quarter revenue between $88.5M-$91.5M, with consensus at $88.22M, and gross margin of 63%-64%. Additionally, Ambarella noted that the acquisition of Oculii Corp. was completed on November 5 and its results of operation will be incorporated into Ambarella's results "beginning as of that date."

During the company's earnings conference call, Ambarella also discussed its vehicle win with EV-maker Rivian. "The Rivian side, we talked about we have 3 silicons in there, 3 type of silicones in there. The first type is CV2AQ -- multiple CV2AQ in the Rivian R1T car and the function of the CD28 is doing video perception. So that's definitely the key components that we want to shoot for in the future. And you can see that we definitely providing the majority of the perception in the R&T car. The second type of silicon is CD22, which provides the surround view as well as some security camera functions that R&D has -- And the third type is P8 is really a serial chip for the MP interface. And those are 3 things that we provide through the R&D," Ambarella President, CEO and Executive Chairman Feng-Ming Wang said.

Additionally, the company also highlighted its partnership with Uber. "In the aftermarket automotive dash camera market, European market leader Garmin announced a pilot program with Uber for its 232 GW-cam. The dual camera design is based on Ambarella's A12 SoC and includes a cabin view camera that use infrared night vision technology and wide-angle 140-degree angle lens to provide an actual level of security for Uber drivers and writers," Ambarella said.

INCREASING PROGRAM WIN MOMENTUM: Roth Capital analyst Suji Desilva raised the firm's price target on Ambarella to $260 from $225, while keeping a Buy rating on the shares after the company reported a "solid" quarter of sequential revenue growth and earnings per share upside. Contribution was strong from auto/CV, which is tracking to full-year growth expectations, Desilva added. The analyst believes Ambarella overall visibility is improving despite supply constraints, reflecting increasing program win momentum.

Meanwhile, Colliers analyst Derek Soderberg raised the firm's price target on Ambarella to $245 from $135 and kept a Buy rating on the shares after the company reported October quarter revenue and EPS that beat his estimates and consensus. The analyst believes Ambarella has "sufficiently proven robust demand" for its computer vision SoCs, so he is valuing the company on a sum-of-the-parts basis to give "this high growth business proper credit." Ambarella's six-year, discounted Automotive funnel has tripled from a year ago and the company also announced a vehicle win with EV-maker Rivian for L2+ assist and surround view, noted Soderberg, who now sees a path toward $250M in Auto CV revenue within a few years.

Also keeping a Overweight rating on the shares, KeyBanc analyst John Vinh raised the firm's price target on Ambarella to $230 from $185. The analyst noted that despite encountering kitting shortages, Ambarella delivered results and guidance above expectations. More notably, Ambarella announced that it is shipping in production into EV truck maker Rivian in the model R1T with multiple CV SoCs to support video perception, surround view processing, and security, Vinh says, highlighting that the company has also tripled its 6-year discounted auto revenue funnel to $1.8B.

Also bullish on the name, Needham analyst N. Quinn Bolton raised the firm's price target on Ambarella to $225 from $220 and kept a Buy rating on the shares given the company's third-quarter earnings beat and better-than-expected fourth-quarter guidance thanks to the recovery in supply from Samsung's (SSNLF) Texas fab. Nonetheless, he warned that shortages of other key components became a challenge in the quarter and will persist into the fourth quarter. Bolton further noted that Ambarella has indicated that its automotive pipeline has tripled to $1.8B from $600MM over the past year while also citing that Rivian's R1T truck utilizing multiple CV2AQ SoCs for AI vision processing and AMBA's CV22AQ SoC for the truck's surround view camera.

Following the news, Morgan Stanley analyst Joseph Moore also upped his price target on Ambarella to $229 from $222, while maintaining an Overweight rating on the shares. Moore thinks "the headline" from the report will be the company's commentary that its automotive "funnel" of six-year revenue potential tripled to $1.8B from the $600M forecast provided a year ago. Design win traction, including notable new design winswith Uber and China's Shanqi, make it "increasingly clear that the company is emerging as a leader in the category of automotive computer vision," Moore added.

Cowen, Craig-Hallum, Wells Fargo, Baird, and Deutsch Bank also raised their price targets on Ambarella's shares following the company's quarterly results.

PRICE ACTION: In Wednesday's midday trading, shares of Ambarella have gained almost 25% to $223.78.

Disclosure: None

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