Shares of Ambarella (AMBA) are on the rise after the company said it does not expect the U.S. Entity List rule to have a significant impact on the company's current financial results and confirmed its previously issued guidance.
NO SIGNIFICANT IMPACT FROM ENTITY LIST RULE: In a regulatory filing, Ambarella noted that on October 9, the Bureau of Industry and Security of the United States Department of Commerce published a final rule adding 28 Chinese entities, including several China-based IP security camera customers of Ambarella, to the Entity List. "While the Entity List Rule will negatively impact the company's ability to ship items subject to BIS regulations, including U.S.-produced system-on-chip, or SoC, products to the listed entities, at this time, the company expects that it will continue to be able to ship foreign-produced products to the listed entities, including SoCs responsible for a majority of the company's current revenue with those newly listed entities as well as the company's recently introduced computer vision SoCs. Consequently, based on information known to the company at this time, the company does not expect the Entity List Rule to have a significant impact on the company's current financial results and confirms the guidance provided and discussed in the company's last earnings call on August 29," Ambarella stated in the filing. The company previously provided a third quarter revenue view of $63M-$67M, with consensus currently at $64.97M.
KEYBANC BOOSTS ESTIMATES: In a research note to investors, KeyBanc analyst John Vinh noted that Ambarella sees limited impact from the recent Bureau of Industry ruling and reiterated guidance after reviewing the updated Entity List ban restrictions involving HikVision/Dahua, as the majority of revenues that it ships to foreign customers on the Entity List are foreign produced. The analyst, who previously excluded revenues associated with HikVision/ Dahua from his numbers, raised his fiscal 2020 earnings per share estimate for Ambarella to 50c from 37c and 2021 estimate to 65c from 19c. The consensus estimates are 49c and 61c, respectively. Vinh reiterated a Sector Weight rating on Ambarella.
ABILITY TO SHIP NEWEST CV PRODUCTS 'CRUCIAL': Also commenting on Ambarella disclosure that it expects no significant impact to financial results despite the U.S. government Entity List update, Roth Capital analyst Suji Desilva argued that the company's newest computer vision products being unaffected is "a critical point" as the CV products are driving growth right now. Desilva reiterated a Neutral rating on Ambarella shares.
PRICE ACTION: In morning trading, shares of Ambarella have gained about 5% to $55.67.