Rosenblatt reiterates Buy rating on Ambarella stock ahead of earnings

Rosenblatt maintained a Buy rating on Ambarella Inc. stock (NASDAQ: AMBA) and set a price target of $120.00 ahead of the company's earnings report on September 3. The firm anticipates the company to beat and raise estimates for its second-quarter fiscal 2027 results. Analysts have upgraded their earnings estimates for the upcoming period, citing Ambarella's 5nm Edge AI system-on-chip designs that have gained traction in production volume.

These Gen 3 SoCs are contributing to higher average selling prices and expanding customer base. Ambarella's 4nm and 2nm SoCs lead the market in performance per watt, while its CV architecture employs embedded SRAM, decreasing the need for system DRAM. At last year's Age of AI Technology Summit, Ambarella's Customer Growth Officer, Muneyb Minhazuddin, explained that edge AI will proliferate across various fragmented verticals.

Ambarella has introduced a developer-friendly interface for its Cooper SDK, which expedites the integration of existing applications and models onto its chips. Ambarella's revenue has grown by 28% in the last twelve months, and analysts believe the stock is undervalued. NXP Semiconductor is reportedly in acquisition talks with Ambarella, though management will not discuss this or any other strategic alternatives during the earnings conference call.

The company has reported a 28% revenue growth over the past year and is expected to release its earnings report on September 3, with options data suggesting a 14% potential stock movement.