Ambarella Inc.

Ambarella’s Q2 results were on par with management expectations and surpassed the analyst consensus on Wall Street. The company’s revenue was up 2% from the same period last year, but it was down 10% sequentially. The company’s blended average selling price surpassed $10 due to the considerable year-over-year growth in CV revenue. In total, they have supplied over 10 million CV SoCs, with more than 20% going to the automotive industry. They also endured the brunt of the 14-nanometer shortfall and the China closure in Q2. Moreover, incomplete kits continue to be a barrier for many of their clients. In the second half, these variables should all contribute to some improvements. However, since some clients are now lowering their inventory levels, especially those with lead time contracts, their recovery outlook is muted. CV5, their first SoC built on a 5-nanometer process, went into production in Q2, about a quarter earlier than anticipated. Three IoT customers each acquired a production volume from Ambarella in Q2. JVC also unveiled its new PZ2510 videoconferencing camera in Japan, emphasizing live broadcast and recording uses like concerts and lectures. Overall, Ambarella had an interesting set of developments in the quarter. We maintain our ‘Buy’ rating on their stock with a revised target price.