Ambarella ( NASDAQ: AMBA ) shares fell more than 10% on Wednesday after the chipmaker reported a weaker-than-expected outlook, but investment firm Baird defended the company, highlighting its position in driverless cars.
Analyst Tristan Gerra, who has an outperform rating and $120 per-share price target on Ambarella ( AMBA ) shares, noted the company's fundamentals "remain strong," citing recent design wins for its computer vision, or CV2, chip from Bosch.
"In our view, stock catalysts ahead include CV2 design wins at additional automotive [original design manufacturers], CV2/CV3 platform designs at automotive [original equipment manufacturers], along with software design wins," Gerra wrote.
Gerra added "significant" reductions in channel inventory should help make the upcoming first-quarter a trough for revenue and margin.
Ambarella ( AMBA ) said it expects its first-quarter revenue to be between $60M and $64M, below analysts' estimates of $77.1M in sales, and the $90.3M in revenue in the same period a year ago.
Additionally, any recovery in China, particularly in the second-half of the year, is seen as contributing to revenue, Gerra explained.
"Net, we continue to believe [Level 2+ autonomous driving] represents a significant share gain opportunity for Ambarella, while the company is very well positioned in [Level 3 to Level 4] platforms as well," Gerra added.
Separately on Wednesday, investment firm Roth MKM downgraded its rating on Ambarella's ( AMBA ) stock to neutral from buy, but said the company's issues should be "short lived."
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Ambarella plummets 10% on weak outlook but Baird defends on new design wins