Analyst Vivek Arya of Bank of America Securities reiterated a Hold rating on Ambarella, boosting the price target to $92.00.
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Vivek Arya’s rating is based on Ambarella’s strong performance in the edge AI sector, which has shown significant growth and potential. The company reported a positive third-quarter performance with increased revenue guidance, largely driven by its edge AI business. This sector is expected to continue expanding, which bodes well for Ambarella’s future prospects. However, Arya also notes that despite this growth, there are concerns about the company’s gross margins, which are under pressure due to a shift in customer mix and potential pricing challenges.
Additionally, Arya points out that while Ambarella is making strides in portable video applications and has secured significant design wins, there are risks associated with its consumer exposure and lack of presence in the L2+ automotive market. The company also continues to operate at a GAAP net loss, primarily due to high stock-based compensation, which could limit its operational flexibility. These factors combined lead Arya to maintain a Hold rating, balancing the company’s growth potential with the existing financial and market challenges.