Ambarella (AMBA) Valuation in Focus After Raised Guidance and Strong Q3 Results

Ambarella (AMBA) drew extra attention after its fiscal third-quarter results showed a strong year-over-year revenue jump and improved profitability. The company raised its full-year revenue outlook, indicating continued business momentum.

See our latest analysis for Ambarella.

Even with brisk revenue growth and a raised outlook, Ambarella’s share price has seen sharp swings lately, tumbling nearly 14% over the past 30 days and surrendering much of this quarter’s momentum. Still, longer-term holders have eked out a 3.6% total shareholder return in the past year. This suggests the market remains cautiously optimistic about Ambarella’s push into Edge AI, though heightened volatility brings shifting expectations around its growth story and future risks.

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With the stock still down sharply from recent highs, even as the company reports record-setting revenue growth and analysts remain optimistic, investors are left to consider whether Ambarella is trading at a discount or if its future gains are already reflected in the price.

Most Popular Narrative: 24.4% Undervalued

Ambarella’s most widely followed narrative places its fair value well above the latest close, suggesting significant upside potential in the current price. The gap signals that the consensus around future growth, margins, and catalysts is fueling bullish expectations among analysts.

The robust pipeline of new product launches and design wins in autonomous mobility (including automotive safety, ADAS, and telematics) are expected to realize significant long-term, high-volume opportunities. This is improving multi-year revenue visibility and supporting future revenue inflection points as OEM decision cycles play out.

Read the complete narrative.

Want to see what’s powering this price target? The story hinges on rapid innovation, revenue expansion, and bold forecasts for future profit margins. There is a dramatic earnings shift embedded in the expected numbers. What is behind this leap? The next section unlocks the full financial reasoning. Don’t miss these inside details on Ambarella’s valuation case.

Result: Fair Value of $98.09 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent weakness in automotive demand and heavy reliance on volatile IoT sectors could quickly undermine Ambarella’s current growth outlook and bullish expectations.

Find out about the key risks to this Ambarella narrative.

Another View: What Do the Multiples Say?

While the consensus price target highlights Ambarella as undervalued, a closer look at its price-to-sales ratio tells a different story. At 8.5x sales, Ambarella trades much higher than peers (6.1x) and the US Semiconductor industry average (4.6x), as well as above its fair ratio of 5.8x. This suggests the stock is priced for a lot of future success and creates more room for disappointment if growth slows. Is the current premium justified, or are expectations running ahead of reality?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Ambarella Narrative

If you see Ambarella’s story differently, or want to dig deeper on your own, you can frame your own perspective in just a few minutes. Do it your way.

A great starting point for your Ambarella research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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