Ambarella (AMBA) to Post Q2 Earnings: What's in the Cards?

Ambarella AMBA is slated to release second-quarter fiscal 2020 results on Aug 29.

The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters and matched it once, the average beat being 148.9%.

In the last reported quarter, non-GAAP earnings came in at a penny per share against the Zacks Consensus Estimate of a loss of 5 cents. However, it witnessed a substantial decrease from the year-ago quarter’s earnings of 13 cents due to lower revenues and elevated operating expenses.

The company’s revenues of $47.2 million surpassed the consensus mark of $47 million but declined 17% year over year.

For the fiscal second quarter, Ambarella anticipates revenues between $51 million and $53 million. The Zacks Consensus Estimate is currently pegged at $52.1 billion, indicating a plunge of 16.7% from the year-ago reported figure.

Further, the consensus mark for earnings of 33 cents implies a slump of 88% from the prior-year reported number.

Ambarella, Inc. Price and EPS Surprise

Ambarella, Inc. Price and EPS Surprise

Ambarella, Inc. price-eps-surprise | Ambarella, Inc. Quote

Factors to Impact Q2 Results

Ambarella’s earnings are likely to benefit from strong design wins and customer engagement with its AI-enabled video processing chips in the consumer security camera and the automotive market.

The company is gaining from solid momentum in CV22. Moreover, the shipment of CV25 in the fiscal second quarter is also an upside.

Further, order pull-ins by the Chinese professional camera companies fearing a potential ban of U.S. chips sales is a positive.

The company envisions automotive and security revenues to increase sequentially in the fiscal second quarter while all other revenues might fall. Softness in consumer electronics revenues continues to be a dampener.

Notably, declining contribution from drones and wearables is an overhang on top line.

Moreover, global tariff issues, probable export restrictions and changes in the macroeconomic conditions are likely to weigh on the upcoming results.

What Our Model Says

The proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has maximum chances 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, which increases the predictive power of ESP. However, its Earnings ESP of 0.00% in the combination makes surprise prediction difficult.

Stocks to Consider

Here are some stocks worth considering as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:

The Cooper Companies, Inc. COO has an Earnings ESP of +1.50% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has an Earnings ESP of +0.17% and is Zacks #2 Ranked.

Bank of Nova Scotia BNS has an Earnings ESP of +0.97% and a Zacks Rank #2.

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