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Ambarella (AMBA) Expands Its Partner Base With New Agreement

Ambarella AMBA has lost 7.7% in the year-to-date period against the Zacks Electronic-Semiconductor industry’s growth of 17.2%. The stock’s underperformance reflects the company’s dismal financial performance for the past year as customer inventory correction measures continue to hurt the top line.

However, Ambarella is continuously making efforts to gain new customers, which will help it return to its growth trajectory. AMBA recently signed a strategic cooperation agreement with Leapmotor. Both companies will prioritize the manufacturing of first-class intelligent driving in the energy vehicle sphere. Leapmotor will develop intelligent vehicles with Ambarella’s powerful CV3-AD SoCs.

The CV3-AD SoC meets ASIL-B/D functional safety standards and ensures hardware AI acceleration. Moreover, the SoC has enough space for AI and high-performance computing operations, along with a centralized fusion of raw LiDAR.

These features will enable Leapmotor to deliver affordable yet superior electric vehicles with intelligent controls.

Ambarella, Inc. Price and Consensus

Ambarella, Inc. price-consensus-chart | Ambarella, Inc. Quote

Ambarella to Gain From Growing ADAS Market

Ambarella is heavily investing in enhancing its Advanced Driver Assistance Systems (ADAS) capabilities as the market for ADAS is projected to witness a CAGR of 11.7%, per a report by Markets and Markets. The global ADAS market is projected to reach $14 billion by 2028.

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The ADAS market has big names like Ford Motor F, General Motors GM and Tesla TSLA, which create end products. Companies, including Qualcomm, NVIDIA and Texas Instruments, create the intermediary products like automotive cameras and SoCs that go into the making of final products.

For Ford, ADAS has been an important part of its own and Lincoln lineup’s vehicle safety. While General Motors puts these advanced features in its Cadillac lineup. Tesla holds the largest market share of electric vehicles in North America that require innovative ADAS SoCs and automotive cameras.

So far in 2024, AMBA signed multiple deals on ADAS that includes a deal with a smart vehicle security startup, Canopy. Notably, Canopy is backed by Ford Motor. The company also partnered with Neusoft Reach and SANY Group. Ford has secured Canopy which adopted Ambarella’s CV25 AI computer vision SoC for the Pickup Cam system.

Ambarella has also launched System on Chips for AI dash cams integrating front-facing ADAS, namely CV75AX and CV72AX. AMBA also expanded its portfolio with a 5nm CV75S portfolio offering the ADAS segment with the most power- and cost-efficient option to run multi-modal vision-language models. The company also introduced CV3-AD635 and CV3-AD655 SoCs that will enable its customers to develop highway and urban autopilot and automated parking features for vehicles.

Conclusion

With its strong portfolio of proprietary video and image processing system-on-chips, Ambarella is poised to gain from the immense growth opportunity in the ADAS and video-AI market over the long run.

Despite its strengths, Ambarella faces several risks that can undermine this Zacks Rank #3 (Hold) company’s near-term prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Customer inventory reduction actions are likely to hurt the company’s top-line growth in the near term. Higher expenses to expedite orders and secure more capacity are a concern. Global tariff issues, export restrictions and hostile macroeconomic conditions remain headwinds.

Moreover, Ambarella’s valuation looks stretched at the current level, as reflected by the Value Score of F. Therefore, investors should wait for a better entry point for Ambarella.

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