Should you sell your Ambarella stock?

Roth Capital Partners analyst Suji Desilva says Ambarella’s (Ambarella Stock Quote, Chart, News, Analysts, Financials NASDAQ:AMBA) latest results and guidance showed steady growth across IoT and automotive, though lower market valuations have reduced his target.

Desilva maintained his “Neutral” rating on Ambarella and lowered his target to US$65.00 from $90.00. His target is based on about five times his calendar 2027 EV/sales estimate, in line with comparable companies.

“AMBA reported a slight upside in results and guidance with continued growth across IoT and auto,” Desilva said in a Sept. 4 update. “We are encouraged by announced partnerships that take the company into a larger addressable market and new segment opportunities.”

Ambarella reported fiscal Q2 2027 revenue of US$108.1-million, up 7.7% sequentially and 13% year-over-year, slightly ahead of consensus.

Gross margin was 59.3%, down 60 basis points sequentially, while EPS of 18 cents was one cent ahead of consensus.

For fiscal Q3, Ambarella guided revenue to US$115-million to US$124-million, in line with consensus at US$119.3-million. Desilva said the outlook reflects seasonal strength and continued growth from automotive and edge AI program ramps.

The analyst said Ambarella should continue to deliver low-double-digit annual revenue growth, helped by opportunities in edge AI and automotive.

Desilva said new channel partnerships with Capgemini and Macnica should broaden Ambarella’s customer base in edge infrastructure and robotics.

Management cited a serviceable available market of US$8.5-billion next year, growing at a 20% compound annual rate to US$22.9-billion by fiscal 2032, with IoT representing about 70% of the opportunity.

Desilva said Ambarella is also expanding into semi-custom chip projects that combine its own intellectual property with customer technology.

The company is increasingly focused on standalone AI processors, including its new X7 products, compared with its historical focus on products that combined AI with video processing.

Ambarella develops low-power system-on-a-chip semiconductors used for AI processing, image signal processing and video compression in applications including security cameras, drones, wearables, public infrastructure and automotive video systems.

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