Business Corpus: Video Chip Maker Ambarella Tumbles On Weak Sales GuidanceAmbarella, a maker of video compression, image processing and computer vision chips, late Thursday reported fiscal second-quarter results that beat Wall Street's targets. But its sales guidance for the current quarter came in well short of views. The post Video Chip Maker Ambarella Tumbles On Weak Sales Guidance appeared first on Investor's Business Daily.

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Ambarella (AMBA), a maker of video compression, image processing and computer vision chips, late Thursday reported fiscal second-quarter results that beat Wall Street's targets. But its sales guidance for the current quarter came in well short of views, sending its stock tumbling in late trading.

The Santa Clara, Calif.-based company earned an adjusted 25 cents a share on sales of $62.5 million for the quarter ended July 31. Analysts expected it to earn 13 cents a share on sales of $62.1 million. In the year-earlier period, it earned 48 cents a share on sales of $71.6 million.

For the current quarter, Ambarella expects to generate sales of $57 million, based on the midpoint of its guidance. Wall Street was forecasting $73.45 million in sales for the October quarter.

Ambarella stock fell 12.7% in after-hours trading on the stock market today. During the regular session, it dipped 0.8% to 39.75.

Ambarella's business has struggled since the market for action cameras deteriorated with the likes of GoPro (GPRO). In recent years, it has worked to diversify its business. It's now making low-power video-processing chips for security cameras and vision systems for autonomous vehicles.

Declining Gross Profit Margin

The chip designer forecast an adjusted gross profit margin of 59% to 60.5% for the current quarter. Its gross margin was 61.4% in the second quarter, compared with 63% a year earlier.

"While we are disappointed with our near-term outlook, we remain confident that our decision to focus on computer vision applications in the IP (internet protocol) security, automotive and robotics AI (artificial intelligence) markets is the correct strategy and is already bearing fruit," Chief Executive Fermi Wang said in a news release.

Ambarella is seeing encouraging results from customer evaluations of its latest computer vision chips, he said.

"We believe our excellent neural network processing performance combined with the low power of our solutions gives us a strong competitive position in our target markets," Wang said.

Semtech Stock Jumps On Upbeat Report

Elsewhere in the semiconductor sector, Semtech (SMTC) jumped 13.9% to 56.85 on Thursday. In intraday trading, it hit an 18-year high of 58.

At least six Wall Street analysts raised their price targets on Semtech after the chipmaker delivered a beat-and-raise quarterly report late Wednesday.

The most bullish of the bunch was Oppenheimer analyst Rick Schafer. He reiterated his outperform rating on the stock and upped his price target to 65 from 58.

"Management is on track to deliver an organic $1 billion top line by 2022," Schafer said in a report. "We see continued outsized growth and margin expansion on (product) mix and cost control."

Semtech is likely to see "continued or accelerating momentum" thanks to growth opportunities in Internet of Things, data centers and 5G wireless, Baird analyst Tristan Gerra said in a report. He rates the stock as outperform.

Micron CEO Touts Automotive Chip Business At New Plant Site

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